News Analysis

Nifty call: Go short if the price slips below 11,230

| Updated on September 09, 2020

Nifty 50 September Futures (11,245)

Globally, the equity market has appeared to be under pressure for the past couple of days. Yesterday, the US stock market witnessed a considerable fall, with the S&P 500 index and the Dow Jones index losing about 2.8 per cent and 2.2 per cent, respectively. Following this, the Asian markets have been in a decline today. The Nikkei 225 and the Hang Seng indices are down by one per cent each.

Taking cues from the negative bias, the Indian benchmark indices opened with a significant gap-down. Currently, the Nifty50 and the Sensex are trading lower by about 0.75 per cent. Likewise, all the mid-cap and small-cap indices are down between 1.5 per cent to 2.3 per cent. Also, the advances-declines ratio of the Nifty 50 index at 15-35 is clearly bearish. Thus, the market seems to be experiencing a broad-based sell-off today.

Except the Nifty pharma index (up by 0.8 per cent), all the sectoral indices are in the red. Losing nearly 3.3 per cent, the Nifty PSU bank index has been the worst performer, followed by the Nifty bank index, down by 2.3 per cent. This essentially means banking stocks are particularly weak today. Despite the market trading with a bearish bias, volatility has not shot up – the volatility index, India VIX, is trading around Tuesday’s closing level of 22.8.

The September futures of the Nifty 50 opened substantially lower at 11,245 versus yesterday’s close of 11,319. It immediately made an intra-day low of 11,215 and then attempted to recover. The contract rose and registered a day high of 11,282. However, it was unable to establish a rally and has been traversing between 11,230 and 11,280.

Though the trend is bearish, traders can initiate fresh positions with stop-loss at 11,280 if the contract breaches support at 11,230 decisively. On the downside, it can decline to 11,200, below which support can be spotted at 11,135.

Strategy: Short the contract if the price slips below 11,230

Supports: 11,200 and 11,135

Resistances: 11,280 and 11,350

Published on September 09, 2020

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