It’s a sea of red in equity markets as all major indices in Asia are down for the day. ASX 200 (7,038), Nikkei 225 (25,335), Hang Seng (21,260) and KOSPI (2,664) are down by 1, 2.7, 3 and 1.9 per cent respectively. On the back of this, the Indian indices too began the session with considerable gap-down open and have weakened further. Nifty 50 at 15,800 and Sensex at 52,740 are down by 2.7 and 2.9 per cent respectively so far for the day.
The market breadth of the Nifty 50 is showing a clear negative bias as the advance-decline ratio stands at 5-45. All the mid- and small-cap indices are down for the day, losing between 2.6 and 3.2 per cent. Barring the Nifty metal index (up by 0.1 per cent), all other sectoral indices are down led by the Nifty Auto, down by 4.6 per cent. This is followed by the Nifty Private bank, down by 4.5 per cent.
Futures: Following the underlying Nifty 50’s bearish beginning, the March futures of the index opened with significant gap-down at 15,900 versus Friday’s close of 16,259. Since the beginning of the session the contract has been depreciating and is currently hovering around 15,850. The sell-off seems to be broad-based and thus, the Nifty futures is likely to stay bearish for the rest of the day.
However, notice that the day low i.e., 15,757 is just above the support of 15,750. This might provide some sort of support for the bulls. There is no doubt that the overall trend is bearish but there is a possibility of a corrective bounce from here.
So, from the perspective of trading, traders can consider fresh trades in the following manner. That is, short the contract if it breaks below the support of 15,750 with initial stop-loss at 15,875. Alternatively, if the contract rallies, wait for now and initiate short when it touches 16,150 and place stop-loss at 16,300.
In both the cases, when the contract slips below 15,600, revise the stop-loss to 15,775 and tighten it further lower to 15,400 if price touches 15,200. Fully exit at 15,000.
Strategy: Consider going short on Nifty futures below 15,750 with initial stop-loss at 15,875 or short when it rallies to 16,150 with initial stop-loss to 16,300, whichever happens first.
Supports: 15,750 and 15,600
Resistances: 16,000 and 16,150