Nifty call: Short at current levels with stop-loss at 17,315

BL Research Bureau

Nifty 50 December Futures (17,165)

Equities across Asia are getting battered on the back of the renewed concerns about the new variant of the coronavirus i.e., a potentially more infectious version which is named ‘Omicron’. Among the major indices, the Nikkei 225 is down by 1.7 per cent, ASX 200 lost a little over 0.5 per cent, Hang Seng is trading lower by about 1 per cent and the KOSPI down by 0.9 per cent.

Despite this, the Indian benchmarks, which initially saw a steep fall, have recovered well and are in the positive territory. That is, the Nifty 50 is up by about 0.6 per cent whereas the Sensex is up by about 0.75 per cent. However, there are key hurdles ahead for the indices and this rally should be watched cautiously for two reasons. One, markets across Asia are facing significant downward pressure and the domestic market is on a downtrend for more than a month.

The market breadth of the Nifty 50 is indicating a slight positive bias as the advance-decline ratio is at 27-23. But on other hand, mid- and small-cap indices are in the red – down between 0.2 and 1.8 per cent. Among the sectoral indices, the Nifty IT is the top gainer, up by 1.9 per cent whereas the Nifty Media is the top loser, down by 2 per cent.

Futures: The Nifty December futures began the session positively i.e., at 17,095 versus Friday close of 17,052. However, immediately after the open, the contract saw a significant sell-off and thus it made an intraday low of 16,850 – a key support. Nevertheless, the futures swiftly recovered and is currently trading around 17,160, up by nearly 0.7 per cent for the day.

While the rally can get extended from the current levels, it can be limited as the trend still remains bearish. The possibility of the trend turning bullish will only improve if the Nifty futures decisively breach 17,400. Until then, the rallies can invite fresh sellers.

From the current level of 17,165, the contract faces resistances at 17,230 and 17,300. A recovery beyond 17,300 is less likely today and as mentioned earlier, as it advances, fresh sellers might creep in. So, one can stay on the fence now and initiate fresh intraday short positions when futures hit 17,230 and add shorts at 17,270. Place initial stop-loss at 17,315.

On the downside, the futures can be expected to retest 17,000 if the sell-off occurs as we expect. So, liquidate the shorts at 17,000. As a risk management measure, when the contract falls below 17,100, revise the stop-loss to 17,200.

Strategy: Short at 17,230 and at 17,270. Exit the short positions at 17,000. Keep stop-loss initially at 17,315. Revise it to 17,200 if price slips below 17,100.

Supports: 17,000 and 16,850

Resistances: 17,230 and 17,300

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