Technical Analysis

Nifty 50 May Futures (16,944): Go short on a break below 16,870

Gurumurthy K | | Updated on: May 05, 2022

Sensex and Nifty are up about 1.3 per cent each

Sensex and Nifty 50 have recovered some of the loss made yesterday. Thanks to the US Federal Reserve for ruling out chances of more aggressive rate hikes for the rest of the year. But will their stance change in the coming months? The data releases from the US in the coming weeks will give an answer.

Sensex and Nifty are up about 1.3 per cent each. Nifty is trading at 16,898 and Sensex is at 56,406. But overall, the picture of the Indian benchmark indices continues to remain weak. Nifty will have to breach 17,000 decisively to move higher and negate completely the chances of falling back again. Similarly, Sensex has to rise past 57,000 to revisit 58,000 levels again. That seems less likely as seen from the charts. As such, we would prefer to remain on the sell side of the market rather than buying at current levels.

Asian markets are broadly in green. Shanghai Composite (3,071.9, up 0.84 per cent) and Hang Seng (20,979, up 0.55 per cent) are up while Kospi (2,677, down 0.11 per cent) is down marginally. Japan is closed today.

In the US, the Dow Jones Industrial (34,061, up 2.8 per cent) surged after the US Federal Reserve meeting outcome. It will have to be seen if it can sustain above 34,000 and get a strong follow-through rise from here. That would be very bullish.

Futures: The Nifty 50 May (16,944) Futures contract has a key resistance in the 16,950-16,975 region. This is holding well as of now. Support is at 16,870. Inability to breach 16,950 and a subsequent fall below 16,870 can bring back the contract under pressure. In that case, the Nifty 50 May Futures contract can fall to 16,700 and even lower again.

Traders can stay on the side-lines now. Go short on a break below 16,870. Keep the stop-loss at 16,930. Trail the stop-loss down to 16,840 as soon as the contract falls to 16,780. Move the stop-loss further down to 16,770 as soon as the contract touches 16,745 on the downside. Book profits at 16,720.

The contract has to rise past 16,975 and get a strong follow-through rise above 17,000 to negate the above-mentioned fall. In that case, a rise to 17,400 can be seen in the near-term.

Trading Strategy: Go short on a break below 16,870. Keep the stop-loss at 16,930 for the target of 16,720. Trail the stop-loss down to 16,840 as soon as the contract falls to 16,780. Move the stop-loss further down to 16,770 as soon as the contract touches 16,745

Supports: 16,870 and 16,700

Resistances: 16,975 and 17,100

Published on May 05, 2022
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