Nifty Call: Buy with stop-loss at 16,180

Nifty 50 August Futures (16,240)

The Nifty 50 and the Sensex opened today’s session with a considerable gap-up despite the Asian markets sending out mixed signals. However, both the domestic benchmarks gave away all the gains and are now in fact trading lower by 0.3 per cent each compared to yesterday’s closing level – the Nifty is at 16,230 and the Sensex is at 54,370. Among the major Asian indices, the Nikkei 225 gained 0.6 per cent whereas the Hang Seng is down by 0.1 per cent.

The market breadth of the Nifty 50 is indicating a bearish bias as the advance-decline ratio is at 17-33 and like the benchmarks, all the mid- and small-cap indices are in the red. Also, the volatility has gone up as shown by India VIX – the volatility index. It is up by about 2 per cent to 12.95. Among the sectoral indices, the Nifty Metal is the top gainer, up by 2.1 per cent followed by the Nifty Oil & Gas, up by 0.4 per cent. Notably, all other indices are in the red and the top loser being the Nifty Pharma, down by 1.7 per cent followed by the Nifty Consumer durables, down by 1.6 per cent.

Futures: Similar to the underlying Nifty 50 index, the August futures of the index began on the positive note as it opened at 16,308 versus Tuesday’s close of 16,277. However, after marking an intra-day high of 16,324 in the initial hour, the contract made a U-turn and started to decline. Nevertheless, the decline was arrested at 16,200 – a strong support. The contract has bounced a bit and is now hovering at 16,240 and until it stays above 16,200, the likelihood of a rebound is high.

So, traders can risk going long at current levels with stop-loss at 16,180. On the upside, the contract is likely to face resistance at 16,270 and 16,320. But if it breaks below 16,200, the sell-off can intensify, possibly dragging the contract to 16,150 and 16,100.

Strategy: Buy with stop-loss at 16,180

Supports: 16,200 and 16,150

Resistances: 16,270 and 16,320

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