Nifty Call: Short the contract below 11,825

Akhil Nallamuthu BL Research Bureau | Updated on October 28, 2020

Nifty 50 October Futures (11,840)

The Asian market looks mixed as the Nikkei 225 and the Hang Seng are trading lower by 0.5 per cent and 0.4 per cent, respectively, whereas the ASX 200 and the Shanghai composite index are up by 0.2 per cent each.

Notably, the US market posted a loss last session, where the S&P 500 closed lower by 0.3 per cent and Dow Jones lost 0.8 per cent.

The Indian equity benchmarks, which opened with a gap-up, moderated and are currently trading lower by about 0.3 per cent. The Nifty 50 and the Sensex spot indices are trading at 11,840 and 40,300, respectively.

Also read: Day Trading Guide for October 28, 2020

The market breadth of the Nifty 50 index is hinting at a bearish bias as the advance-decline ratio stands at 23-27. The market seems to be more volatile today. The volatility index – India VIX – is up by 2 per cent to 22.65.

The mid-cap and the small-cap indices are trading mixed. Among the sectoral indices the Nifty auto and metal are the top performers, gaining 0.9 per cent and 0.5 per cent, respectively. The Nifty financial services and the Nifty bank index are the top losers, down by 1.3 per cent and 1.2 per cent, respectively.

Similar to the underlying Nifty 50 index, the October futures contract of the index is trading lower at around 11,840. The contract that bounced strongly off the 21-day moving average at 11,740 last session, has erased today’s gain. Since today’s gap-up has not sustained, it could be an indication that the bears are gaining traction.

If the contract declines from the current levels, the nearest support levels can be spotted at 11,825 and 11,770. But if the contract regains positive momentum and breaches 11,900 it could rally to 11,930 and 11,980, which are the subsequent resistance levels.

The above factors give a bearish outlook for the contract. But it has a support at 11,825. Hence, traders can initiate fresh short positions if the contract breaks below 11,825. Stop-loss can be at 11,900.

Strategy: Short the contract below 11,825

Supports: 11,825 and 11,770

Resistances: 11,900 and 11,930

Published on October 28, 2020

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