Technical Analysis

Nifty call: Buy on intra-day declines with stop-loss at 13,970

Akhil Nallamuthu | Updated on January 04, 2021

Nifty 50 January futures (14,090)

The Indian benchmark indices opened Monday’s session with a considerable gap-up. However, over the past couple of hours, the indices have given up some of their gains. Currently, the Nifty 50 and the Sensex are up by 0.3 per cent and 0.1 per cent, respectively.

In Asia, most of the indices like the ASX 200 (gained 1.4 per cent) and the Hang Seng (up by 0.8 per cent) are in the green, with the exception of the Nikkei 225 index, which is down by 0.7 per cent. Yet, the overall sentiment seems positive.

The market breadth of the Nifty 50 index is positively inclined, as the advances-declines ratio stands at 35-15. Nevertheless, volatility has gone up i.e. India VIX – the volatility index – has shot up by about 3.4 per cent to 20.23 levels.

Like the benchmarks, all the mid- and small-cap indices, too, have gained between 0.7 per cent and 1.1 per cent. But the sectoral indices give a different picture in the sense that a few of them are in the red. This is led by the Nifty realty index, down by 0.7 per cent, followed by the Nifty private bank index, down by 0.2 per cent. Among the leaders, the Nifty metal index is the top performer, up by 3.5 per cent,followed by the Nifty IT index, up by 1.4 per cent.

Like the Nifty 50 spot, the January futures contract of the index opened with a gap-up i.e. it began the session at 14,100 versus Friday’s close of 14,053. It then rallied to mark an intraday high of 14,170. But since then, it has been declining, slipping below the 14,000-mark to register the day’s low at 13,970. However, the contract was quick in recovering and has moved back above 14,000 and is currently trading around 14,100. As long as the contract trades above 14,000, the bulls are likely to be in control and so futures might rally again.

Given the above factors, traders can be bullish and buy on declines, with stop-loss at 13,970. On the upside, the nearest resistance levels are at 14,170 and 14,200. Support below 13,970 can be seen at 13,935 and 13,900.

Strategy: Buy on intra-day declines with stop-loss at 13,970

Supports: 14,000 and 13,970

Resistances: 14,170 and 14,200

Published on January 04, 2021

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