Nifty 50 February futures (11,175)

The Indian benchmarks opened in the green today and rallied in the initial hour of the session. But the indices moderated subsequently, giving up most of the early gains. Currently, the Nifty spot index is up by 0.5 per cent and the Sensex spot index by nearly 0.3 per cent.

In Asia, the Nikkei closed the session with a loss of 1.2 per cent. On the other hand, the Hang Seng is flat, whereas the Shanghai composite index is up by 0.7 per cent.

The market breadth of the Nifty 50 index has shown a a bullish bias today as 41 of the 50 stocks have gained and all the mid-cap and small-cap indices are up. Also, all the sectoral indices are in the green, led by the Nifty metal index, which has gained 3.2 per cent, followed by the Nifty pharma index, which is up by 3.1 per cent. But volatility has gone up by 3 per cent. India VIX – the volatility index – is at 26 levels.

The March futures contract of the Nifty index opened with a gap up at 11,179, versus yesterday’s close of 11,123. It then rallied to hit an intra-day high of 11,299. However, the contract could not make further gains and started to decline, indicating selling pressure at higher levels. This sort of price action could be an indication of a weak rally.

Notably, 11,300 is a significant resistance. So, unless the contract breaks out of that level, it cannot be expected to rally. Traders can sell the contract with stop-loss at 11,250 if it falls below 11,130, which is a minor support level.

Strategy: Sell the contract below 11,130 with stop-loss at 11,250

Supports: 11,130 and 11,030

Resistances: 11,250 and 11,300

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