Technical Analysis

Nifty call: Buy the contract if it rallies past 11,900

Akhil Nallamuthu | Updated on October 19, 2020 Published on October 19, 2020

BL Research Bureau

Nifty 50 October Futures (11,860)

As the Asian markets are trading positive, the Indian benchmark indices, taking the positive cues, opened with a considerable gap-up. The Nifty 50 and the Sensex are currently trading higher by 0.8 per cent and 0.9 per cent, respectively. Among the Asian majors, the Nikkei 225 has gained 1.1 per cent, and the Hang Seng is up by 0.8 per cent. The early riser ASX 200 posted a gain of 0.9 per cent. This means the equity market per se is positive and so the gain is likely to at least sustain if not extend, for the rest of the day.

The market breadth of Nifty 50 index is positive as the advance-decline ratio stands at 34-16. Notably, volatility has gone up in the index as indicated by the volatility index – India VIX – which is up by 2 per cent to 22.1. Higher volatility should be seen with caution since it is generally associated with bear trend.

Like the benchmarks, the mid-cap and small-cap indices have gained – between 0.4 per cent and 0.7 per cent so far. Among the sectors, banking stocks seem to be doing well today. The Nifty PSU bank index and the Nifty private bank index are the top gainers, up by 3.1 per cent and 2.6 per cent, respectively. Consequently, the Nifty bank index is up by nearly 2.6 per cent. The Nifty pharma index is the top laggard today, trading lower by about 1.4 per cent.

Following the Nifty 50 spot index, the October series futures contract began today’s session on the front foot by opening at 11,850 versus Friday’s close of 11,765. The contract then rallied and marked an intraday high of 11,898, from where it began moderating as 11,900 is considerable resistance.

Though the index is trading in the green, the intraday price action reveals that the gain was mostly due to the gap-up open. The contract was unable to capitalise the bullish opening to build a rally and seems to be held between 11,830 and 11,900. Given this, the contract cannot be expected to establish a definite trend until unless either of the above-mentioned levels are breached.

Considering the prevailing scenario, even though the domestic market sentiment is positive, supported by bullish markets across Asia, traders can wait and initiate fresh long positions if the contract breaches the hurdle at 11,900. Stop-loss for those longs can be placed at 11,860. Above 11,900 it can advance to 11,950 and then possibly to 12,000. Support levels below 11,830 are at 11,800 and 11,760.

Strategy: Buy the contract if it rallies past 11,900

Supports: 11,830 and 11,800

Resistances: 11,950 and 12,000

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Published on October 19, 2020
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