Technical Analysis

Nifty call: Sell on intraday rally with stop-loss at 14,420

Akhil Nallamuthu | Updated on April 12, 2021

The market breadth of the Nifty 50 indicates a strong negative bias as the advance-decline ratio now stands at 4-46

Nifty 50 April Futures (14,360)

The Indian benchmark indices opened with significant gap-down today on the back of increasing coronavirus cases. Post the session open, both the Nifty 50 and the Sensex declined sharply and are now trading lower by 3.3 per cent each compared to previous close. Other major indices in Asia too are down today, adding to the bearishness. While the Nikkei 225 is down by 0.8 per cent, the Hang Seng and the Shanghai composite index down by 1 and 1.2 per cent, respectively.

The market breadth of the Nifty 50 indicates a strong negative bias as the advance-decline ratio now stands at 4-46. The volatility has gone up which also hint at bearish inclination, i.e., India VIX – the volatility index – has shot up by a little over 15 per cent to 22.80 levels. Also, the mid- and small cap indices too are in a sea of red as they have lost between 5.3 and 7.2 per cent. Among the sectoral indices, barring the Nifty pharma index (up by 1.1 per cent) all other indices have lost today. The Nifty PSU bank index is the top loser, down by nearly 10 per cent followed by the Nifty media index, down by 8 per cent.

Futures: Following the gap-down open of the underlying Nifty 50 index, the futures contract began the session lower at 14,689 versus previous close of 14,889. Right from the open, the contract has been declining and it is now down by about 3.7 per cent for the day so far as it is trading near 14,360. Since the sell-off is broad based, the contract is likely to extend the decline for the day. However, since the volatility is high, one need to be very cautious about fresh trades and the stop-loss for intraday positions will be higher than usual.

Given the above conditions, traders can initiate fresh short positions on rallies with stop-loss at 14,420. Currently trading around 14,360, the index is likely to touch 14,300 and possibly head south to 14,250 and 14,200, which are the support levels. On the upside, the nearest resistance levels are at 14,375 and 14,420.

Strategy: Sell on intraday rallies with stop-loss at 14,420

Supports: 14,250 and 14,200

Resistances: 14,375 and 14,420

Published on April 12, 2021

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