Nifty call: Buy contract if it rallies past 12,000

Nifty 50 October Futures (11,950)

In Asia, except the Nikkei 225 (posted a loss of 0.3 per cent), all other major indices trading with a positive bias. While the ASX 200 has gained half a per cent today, the Hang Seng and the Shanghai composite indices are up by 2.4 per cent and 2.6 per cent, respectively.

Taking cues from the positive equity market sentiment, the Indian benchmark indices are trading in green so far, i.e. the Nifty 50 and Sensex are up by 0.25 per cent and 0.4 per cent.

Despite the Nifty 50 gaining today, the market breadth is equally split between bulls and bears i.e. the advance-decline ratio stands at 25-25. Notably, volatility has shot up significantly. India VIX – the volatility index has increased by about 7.5 per cent to 21.9 – not a conducive environment for the bulls.

Unlike the benchmark indices, the mid-cap and the small-cap indices are trading lower in the range between 0.2 per cent and 0.6 per cent. Among the sectoral indices, the Nifty IT index is the top gainer, up by 1.7 per cent and the Nifty media index is the top loser, down by 1.4 per cent.

The October futures contract of the Nifty 50 index witnessed a gap-up open today i.e. it opened at 11,950 versus previous close of 11,929. The contract then rallied and crossed over the psychological level of 12,000 and registered an intraday high of 12,014. But the rally could not sustain above 12,000 resulting in the contract moderating to the current level of 11,950.

Even though the trend is bullish, the contract should decisively breach 12,000 in order to establish a sustainable rally. Hence, traders can initiate fresh long positions with stop-loss of 11,950 if the contract gains above 12,000.

Strategy: Buy the contract if it rallies past 12,000

Supports: 11,900 and 11,875

Resistances: 12,000 and 12,050

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