Technical Analysis

Nifty call: Initiate fresh shorts at current level and on a rise to 16,940

Akhil Nallamuthu | Updated on: Dec 22, 2021

Nifty 50 December futures (16,890)

The equity indices across Asia are showing a positive inclination today. While the Nikkei 225 is trading flat, other major indices like the ASX 200, Hang Seng and KOSPI are up by 0.1, 0.3 and 0.2 per cent, respectively. As a result, the Indian benchmarks too i.e., the Nifty 50 and the Sensex are positive today, and are up by nearly 0.6 per cent each. Nifty is at 16,870 and Sensex at 56,630.

The market breadth of the Nifty also indicates a bullish bias as the advance-decline ratio stands at 39-11. Like the benchmark indices, all mid- and small-cap indices are in the green, gaining between 0.8 and 1.8 per cent. Similarly, all the sectoral indices have gained as well. The Nifty Realty and Metal are the top gainers, up by 2 and 1.5 per cent, respectively. While these are bullish indications, it should be noted that the Nifty and the Sensex are now facing strong barriers.

Futures: The December futures of the Nifty opened the session with a gap-up at 16,877 versus yesterday’s close of 16,800. While it rallied and marked an intra-day high of 16,943, it has now pulled back to 16,890. Notably, the price band of 16,850–17,000 is a considerable resistance zone and as long as the contract stays below these levels, the short-term trend will remain bearish. Thus, rallies are likely to be sold-off. So, one can maintain a bearish view until Nifty futures decisively breaks through the hurdle at 17,000.

From the current level, the contract might turn downward and could decline to 16,650 and possibly to 16,500, which are important support levels.

Considering the above factors, traders can initiate shorts at the current level and add more shorts when the contract rallies to 16,940 – a strong resistance. Keep initial stop-loss at 17,025.

When the contract slips to 16,750, revise the stop-loss to 16,850 and bring it further down to 16,750 if the contract falls to 16,650. Liquidate 50 per cent of the shorts at 16,650, and the remaining at 16,500.

Strategy: Initiate fresh shorts at the current level and on a rise to 16,940. Place initial stop-loss at 17,025. When the contract falls below 16,750, revise down the stop-loss to 16,850. Book 50 per cent profit at 16,650. Thereafter, shift stop-loss to 16,750 and liquidate the remaining at 16,500.

Supports: 16,750 and 16,650

Resistances: 16,940 and 17,000

Published on December 22, 2021
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