Technical Analysis

Nifty call: Buy the contract with stop-loss at 14,575

Akhil Nallamuthu | Updated on January 14, 2021 Published on January 14, 2021

BL Research Bureau

Nifty 50 January Futures (14,615)

Despite positive cues from the Asian markets, the domestic benchmark indices opened today’s session slightly lower and witnessed a decline. Nevertheless, the indices quickly turned direction and recouped its losses. The Nifty 50 and the Sensex are currently trading higher by 0.2 per cent compared to yesterday’s closing level.

However, the recovery seems to be thin as indicated by the market breadth of the Nifty 50, i.e., out of the 50 stocks in the index, 26 stocks are still trading below last session’s closing price. Yet, the volatility looks marginally down. India VIX – the volatility index – is down by about 0.8 per cent to 23.10.

Looking at the mid- and small-cap indices, it can be observed that the small-cap stocks seem to do better than the mid-caps so far. Going by the sectors, PSU and FMCG stocks looks to be the favourites today as Nifty PSU bank index is the top gainer, up by 0.9 per cent followed by the Nifty FMCG index, up by about 0.7 per cent. On the other hand, the Nifty metal index is the top loser, down by nearly 1 per cent, and the Nifty IT index is down by 0.5 per cent.

Like the Nifty 50 index, its futures contract (January expiry) saw a gap-down open at 14,580 versus Wednesday’s close of 14,606. It then dropped quickly to mark a low of 14,504 from where it quickly recovered. Fresh buyers, seem to have embarked when the contract declined towards the support of 14,500. This is the level that arrested the decline in yesterday’s session as well.

The recovery from today’s low has lifted the contract above 14,600 and is currently hovering at 14,615. Notably, the price level of 14,625 is considerable resistance. Considering that the market breadth is not bullish and the contract is trading near the resistance at 14,625, the recovery in the past couple of hours should be taken with a pinch of salt.

Considering the above factors, traders can stay on the sidelines for now. Initiate fresh long positions if the contract decisively breaks out of 14,625. In this case, place stop-loss at 14,575. A breach of 14,625 can take the contract to 14,660 and possibly to 14,700.

But do note that if the contract slips below 14,580, it can decline to 14,550. Support below that level is at 14,500.

Strategy: Buy the contract if it breaks out of 14,625; stop-loss can be at 14,575.

Supports: 14,580 and 14,550

Resistances: 14,625 and 14,660

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Published on January 14, 2021
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