Nifty 50 October Futures (18,040)

Equity markets across Asia have been facing a downward pressure and the major indices are in the red. The Nikkei 225, the ASX 200 and the Hang Seng are down by 0.3, 0.9 and 0.2 per cent respectively so far. Following this, the Indian benchmarks, the Nifty 50 and the Sensex, have lost about 0.8 per cent each. The Nifty is at 18,070 and the Sensex is at 60,700.

The market breadth of the Nifty 50 is showing a bearish bias as the advance-decline ratio stands at 11-39. Similarly, the mid- and small-cap indices are in the red, down between 0.35 and 1 per cent. Likewise, all the sectoral indices are down – the Nifty PSU bank and Realty are the top losers, down by 2.9 and 2.3 per cent. Also, the volatility has gone up today, something that is synonymous with bearishness. That is, India VIX, the volatility index, is up by 2.8 per cent to 17.30.

Futures: Similar to the underlying Nifty 50, the October futures of the index opened lower at 18,194 versus yesterday’s close of 18,215. But since the beginning of the session, the contract has been making steady decline and is now trading around 18,040.

Given that the sell-off is broad-based and that the markets across Asian are trading with a negative bias, the likelihood of a decline from here looks highly probable. However, the futures has a strong support at 18,000, which can pose considerable challenge to the bears.

So, traders can wait for the support at 18,000 to be breached before shorting the contract. Initiate fresh short below 18,000 with stop-loss at 18,050. Below 18,000, the contract is likely to drop to the immediate support levels at 17,920 and 17,865, which can be the targets for the shorts.

Strategy: Short the contract below 18,000 with stop-loss at 18,050; targets at 17,920 and 17,865.

Supports: 18,000 and 17,920

Resistances: 18,050 and 18,100