Nifty call: Short the contract with stop-loss at 12,175

BL Research Bureau

Nifty 50 February Futures (12,105)

The Indian benchmarks have opened the week with a bearish bias. The Nifty spot and the Sensex spot indices are down by around 0.1 per cent. The Asian market is signalling mixed cues as the Nikkei 225 index has closed today’s session with 0.7 per cent loss whereas the Hang Seng index has gained by 0.6 per cent.

The market breadth of the Nifty 50 index is inclined towards bears as the advance-decline ratio stands at 21-29. All mid-cap and small-cap indices are trading lower in today’s session. Barring the Nifty PVT bank index (up by 0.15 per cent), all other sectoral indices are down so far, led by the Nifty PSU bank index which has lost nearly 1.8 per cent. This indicates broader selling pressure.

The volatility has shot up today as indicated by the volatility index, India VIX. It has gone up by nearly 6 per cent to 14.4 levels. As an increase in volatility is generally associated with a bear trend, the overall market might face more downside in today’s session.

The February futures contract of the Nifty index opened higher at 12,140 versus Friday’s close of 12,129. But after registering an intra-day high of 12,158, the futures started to decline. It is currently trading around the 23.6 per cent Fibonacci retracement level of the previous upswing, at 12,105. Since the overall market is facing downward pressure, the contract may witness a further decline. Hence, traders can short the contract with stop-loss at 12,175.

Strategy: Short the contract with stop-loss at 12,175

Supports: 12,000 and 11,970

Resistances: 12,175 and 12,235

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