Sensex and Nifty 50 have declined sharply. Both the indices are trading down over 1 per cent each. Nifty is trading at 16,287, down 1.16 per cent and Sensex is at 54,638, down 1.23 per cent. Failure to sustain the bounce witnessed on Thursday indicates the inherent weakness in the indices.
This keeps the indices vulnerable to break below their crucial supports and see a steeper fall. 16,200 on the Nifty and 54,500-54,000 on the Sensex are important supports. A break below these supports will intensify the sell-off next week.
In Asia, barring the Shanghai Composite (3,257, up 0.58 per cent) other major indices are trading in red. Nikkei 225 (27,821), Hang Seng (21,828) and Kospi (2,588) are are down in the range of 0.18-1.51 per cent.
In the US, the Dow Jones Industrial Average (32,272.79) fell sharply by 1.94 per cent yesterday and has closed below the key level of 32,500. Inability to bounce above 32,500 again from here will be bearish to see further fall in the coming days.
Futures: The Nifty 50 June (16,279) Futures down 1.2 per cent. Support is at 16,200. The price action around 16,200 will need a close watch. A break below it will trigger a further fall towards 16,000. On the other hand, a bounce from 16,200 can take the contract up to 16,400 again.
Traders can wait and go short on break below 16,200. Stop-loss can be placed at 16,280. Trail the stop-loss down to 16,140 as soon as the contract falls to 16,080. Move the stop-loss further down to 16,090 as soon as the contract touches 16,060 on the downside. Book profits at 16,030.
The contract will have to breach 16,500 in order to ease the downside pressure and avoid a steeper fall.
Trading Strategy: Go short on a break below 16,200. Keep the stop-loss at 16,280 for the target of 16,030. Trail the stop-loss down to 16,140 as soon as the contract falls to 16,080. Move the stop-loss further down to 16,090 as soon as the contract touches 16,060.
Supports: 16,200 and 16,000.
Resistances: 16,400 and 16500.