Sensex and Nifty 50 are trading sharply lower. Both the indices are down over a per cent today. Nifty is trading just below the psychological level of 17,000. It is at 16,970, down 1.78 per cent. Sensex is down 1.76 per cent and is trading at 56,842. The outlook is bearish. Next week, Nifty can fall to 16,700-16,600 ahead of the Union Budget . Sensex, on the other hand, can test 56,000-55,500 on the downside.

In Asia, all major indices are trading sharply lower. Nikkei 225 (26,121) is down 3.3 per cent. Kospi (2,634) and Hang Seng (23,748) are down over 2.8 and 2.6 per cent, respectively. Shanghai Composite (3,415) is down 1.2 per cent.

In the US, the Dow Jones Industrial Average (34,168, down 0.38 per cent) has closed just above the crucial level of 34,000. A strong break and close below 34,000 will be bearish to see 33,000 and even 32,000 on the downside. The price action in the coming days will need a close watch.

Futures: The Nifty 50 February Futures (16,993) is trading down 1.9 per cent. Strong resistance is in the 17,150-17,200 region. Intraday rallies if seen are likely to be capped at 17,200. A fall to 16,800-16,700 can be seen in the coming session. Traders can go short at current levels and accumulate more shorts at 17,120. Keep the stop-loss 17,220. Revise the stop-loss down to 16,960 as soon as the contract moves down to 16,880. Move the stop-loss further down to 16,830 as soon as the contract falls to 16,760. Book profits at 16,720.

Trade Strategy:

1 Go short now and on rallies at 17,120 with a stop-loss at 17,220 and a target of 16,660. 2 Trail the stop-loss down to 16,960 as soon as the contract moves down to 16,880. 3 Move the stop-loss further down to 16,830 as soon as the contract falls to 16,740.

Supports: 17,800 and 17,700

Resistances: 17,150 and 17,200