Nifty Call: Go short at current levels and on rallies at 17,420

Equity markets are under jitters following liquidity issues with China’s largest property developer Evergrande. The Dow Jones Industrial Average (33,970.47) was down 1.78 per cent and Germany’s DAX was down over 2 per cent yesterday. In Asia, Japan’s Nikkei is down 1.7 per cent and Hong Kong’s Hang Seng index is down 0.4 per cent today. On the domestic front the Sensex and Nifty 50 have declined about 0.2 per cent today after having fallen over a per cent yesterday.

Nifty rose to a high of 17,480 and has come-off sharply from there. It is currently trading at 17,382. Sensex on the other hand has come-off from the high of 58,778 and is currently at 58,406. The outlook is bearish. Nifty has room to test 17,300. A break below 17,300 can see an extended fall to 17,250-17,200 in the coming sessions. Resistance is at 17,430.

Futures: The Nifty September futures contract has strong resistance in the 17,420–17,450 region. This resistance zone has held well today. The contract rose to 17,475 in initial trades and has come-off from there. It is currently trading at 17,370. The outlook is bearish. The contract can fall to 17,270 initially and then 17,200 eventually in the coming days.

A positional trade is recommended at the moment. We suggest traders to go short at current levels and on rallies at 17,420. Stop-loss can be kept at 17,460. Trail stop-loss to 17,350 as soon as the market moves down to 17,320 and further down to 17,330 as soon as the contract moves down to 17,305. Book partial profits (50 per cent) at 17,285 and then move the stop-loss further lower to 17,305 for the rest of the 50 per cent holding. Exit the balance 50 per cent of the long positions at 17,230

Strategy: Go short at current levels and on rallies at 17,420. Keep the stop-loss at 17,460. Trail stop-loss to 17,350 as soon as the market moves down to 17,320.

Supports: 17,270 and 17,000

Resistances: 17,450 and 17,500

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