Nifty call: Sell on rallies with stop-loss at 9,420

Nifty 50 May futures (9,315)

The Indian benchmarks -- the Nifty spot and the Sensex spot indices -- witnessed a gap-up open. They rallied during the initial hour, but subsequently began to moderate. Both the indices are now trading higher by about 0.6 per cent. The Nikkei index, one of the major Asian indices, closed today’s session with a gain of one per cent; also, the Hang Seng index is up by 1.4 per cent.

The market breadth of the index is aligned with the bulls as 35 of the 50 stocks are in the green. All the mid-cap and small-cap indices have gained as well. Among the sectoral indices, the Nifty Auto index is the top gainer, up by 3.7 per cent, whereas the Nifty bank and the Nifty private bank indices are the top losers, down by 0.8 per cent each. As the market is biased to the upside, volatility seems to have come down a bit today. India VIX – the volatility index is down by 1.6 per cent at 37.8 levels.

The May futures contract of the Nifty index opened on a strong note at 9,335 versus Friday’s closing price of 9,236. It then rallied and registered an intra-day high of 9,442. However, the contract began to descend and has fallen below the important level of 9,400.

Since the beginning of this month, the contract has oscillated between 9,150 and 9,420 levels. So, unless the contract breaches either of these levels, the next leg of trend cannot be confirmed. Currently trading at 9,315, the price is near the upper limit of the range. Considering these factors, traders can short the contract on rallies, with stop-loss at 9,420.

Strategy: Sell on rallies with stop-loss at 9,420

Supports: 9,275 and 9,200

Resistances: 9,400 and 9,420

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