Nifty call: Go short with stop-loss at 17,600 if contract breaches support at 17,500

Taking cues from the Asian equity indices, which are trading in the red, the Indian benchmark indices opened Wednesday’s session with a considerable gap-down. Although they have recovered, the Nifty 50 at 17,565 and the Sensex at 58,875, are down by 0.5 per cent each. Among the major Asian indices, Nikkei 225, ASX 200, Hang Seng and KOSPI are down in the range of 0.9 and 1.8 per cent.

The market breadth of the Nifty 50 shows a bearish bias as the advances/ declines ratio is at 20/30. Interestingly though, the mid- and small-cap indices, the Midcap 50 and the Smallcap 50, are up by 0.2 and 0.4 per cent, respectively.

Among the sectoral indices, the Nifty FMCG is the top gainer, up by 0.4 per cent, whereas the Nifty Auto is the worst performer, down by 0.75 per cent.

Futures: The September futures of the Nifty 50 index opened today’s session with a considerable gap-down at 17,543 versus yesterday’s close of 17,683. It has now recovered to 17,590. That said, the contract continues to stay in the broad range of 17,500–17,800.

Since the price action and sentiment seems to be bearish, the possibility of Nifty futures falling below 17,500 is high. In such a case, the contract could decline to 17,250 – its nearest support. The subsequent support is at 17,000.

Considering the above, traders can wait for now and initiate fresh short positions if the contract breaches the support at 17,500. Place stop-loss at 17,600. Exit the shorts at 17,250.

Strategy: Go short with stop-loss at 17,600 if the contract decisively breaches the support at 17,500. Book profits at 17,250.

Supports: 17,500 and 17,250

Resistances: 17,650 and 17,800

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