Technical Analysis

Nifty call: Buy on declines with stop-loss at 11,650

Akhil Nallamuthu | Updated on October 07, 2020

Nifty 50 October futures (11,725)

Even as the US market ended with a loss on Tuesday, the Asian markets look positively biased. Early riser ASX 200 has gained by 1.2 per cent, the Hang Seng is up by nearly one per cent and the KOSPI is up by 0.9 per cent. Nevertheless, the Nikkei 225 and the Shanghai composite index are flat for the day.

Following the positive bias, the Indian benchmark indices are trading higher today. While the Nifty 50 is up by 0.5 per cent, the Sensex is up by nearly 0.7 per cent.

The market breadth of the Nifty 50 index shows a bearish bias even though it has been gaining through the day. The advances-declines ratio stands at 20-30. Another note of caution is on volatility. That is, India VIX – the volatility index – is up by 2.5 per cent to 20.1

Unlike the benchmarks, the mid-cap and small-cap indices are trading in the red. They have lost between 0.1 and 0.6 per cent so far. Among the sectoral indices, the Nifty auto is the top gainer, up by 0.5 per cent, whereas the Nifty media index is the top loser, down by 1.5 per cent.

The October futures contract of the Nifty 50 index opened slightly higher at 11,676 versus yesterday’s close of 11,669. It then continued to rally and marked an intra-day high of 11,750 and is now trading around 11,725. The contract has rallied past 11,700 and the trend looks bullish. Hence, traders can initiate fresh long positions on declines with stop-loss at 11,650.

A rally from the current level can take the contract to 11,780 and 11,800. Support levels from the current levels are at 11,700 and 11,650.

Strategy: Buy on declines with stop-loss at 11,650

Supports: 11,700 and 11,650

Resistances: 11,780 and 11,800

Published on October 07, 2020

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