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Nifty 50 December Futures (16,600)
Following the negative cues from the Asian market, the Indian benchmark indices began today’s session with a considerable gap-down. The Nifty 50 and the Sensex continues to be negative and are down by 2.5 per cent each. Nifty is at 16,540 whereas Sensex is at 55,555.
Among the Asian majors, the ASX 200 and the Nikkei 225 have lost 0.2 and 2.2 per cent. The Hang Seng and the KOSPI are down by 1.8 and 1.7 per cent respectively.
The market breadth of the Nifty 50 index is showing a strong bearish bias as the advance-decline ratio currently stands at 3-47. All the mid- and small-cap indices have taken a beating as they are down in the range of 3 to 4 per cent. Moreover, all the sectoral indices are in the red led by the Nifty Realty index, down by 5 per cent followed by the Nifty PSU bank index, down by 4.2 per cent. Therefore, the selling is broad-based and so, the likelihood of an intraday recovery is very small.
Futures: The December futures of the Nifty opened lower at 16,848 versus Friday’s close of 17,023. Since then, it is on a steady decline and is currently hovering around 16,600. The price action is clearly bearish, and we could see more decline from the current levels. Given that the Asian markets are down and that the sell-off is broad-based, shorting could be the better option today.
However, since it has come down quickly, there could an intraday corrective rally. So, traders can short at current levels and add more shorts it the contract rallies to 16,640. Place initial stop-loss at 16,700. On the downside, the contract could decline to 16,500 and possibly it could even drop to 16,400. So, one can hold the short until 16,400 and exit here. But shift the stop-loss to 16,600 if the contract slips below 16,500.
Strategy: Initiate fresh shorts at current level and on a rise to 16,640 with initial stop-loss at 16,700. Shift the stop-loss to 16,600 if price slips below 16,500. Liquidate shorts at 16,400
Supports: 16,640 and 16,670
Resistances: 16,500 and 16,400
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