The Nifty call

Akhil Nallamuthu | | Updated on: Jan 06, 2022
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The market breadth of the Nifty is showing a strong bearish inclination as the advance-decline ratio stands at 5-45

Nifty 50 January Futures (17,730)

The Nifty 50 and the Sensex are down by about 1.2 per cent each and are at 17,700 and 59,430, respectively. The bearish bias seems to have been given by the Asian markets where all major equity indices are trading in the red. Among the key indices, ASX 200 and Nikkei 225 have lost 2.75 per cent each and Hang Seng has lost 0.3 per cent.

The market breadth of the Nifty is showing a strong bearish inclination as the advance-decline ratio stands at 5-45. All mid- and small-cap indices are down, losing between 0.15 and 0.8 per cent. Moreover, among the sectoral indices, except the Nifty Media, up by 0.5 per cent, all others are down for the day. The Nifty Realty and IT are the top losers, down by 2.1 and 1.8 per cent. Therefore, the sell-off is broad based and thus the domestic equity market is likely to stay negative for the rest of the day.

Futures: Similar to the underlying Nifty 50, the January futures of the index began the session with a gap-down i.e., at 17,830 versus yesterday’s close of 17,960. After marking an intraday low of 17,693, the contract is hovering around 17,730. Notably, 17,700 is a support and the futures seemed to have inched up on the back of this. However, the downward momentum looks strong and the support at 17,700 is expected to be breached.

A slip below this level can drag the contract to 17,630 – the next a support. A break below this level can drag the contract to 17,500. On the upside, the contract will face resistance at 17,800 and 17,830.

Given the above factors, traders can short the contract at the current level of 17,730 and add shorts when it rises to 17,775. Place initial stop-loss at 17,840 and revise it down to 17,700 when the price drops below 17,625. Exit the shorts at 17,500.

Strategy: Short now and on a rally to 17,775; stop-loss at 17,840. Shift stop-loss to 17,700 if the contract falls below 17,625. Liquidate the shorts at 17,500.

Supports: 17,630 and 17,500

Resistances: 17,800 and 17,830

Published on January 06, 2022

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