Domestic equity indices, the Nifty 50 and Sensex, began Tuesday’s session with a gap-up. But they could not hold on to the gains and have declined. Nifty 50 at 17,600 and Sensex at 59,000 are now down by about 0.4 per cent so far today.

The Asian markets are mixed, though the ASX 200 and Nikkei 225 are flat today. On the other hand, the Hang Seng has lost 0.5 per cent, whereas the KOSPI has gained 0.15.

The Nifty 50’s market breadth indicates a bearish bias as the advances/ declines ratio stands at 13/37. Moreover, barring Nifty Healthcare (up by 0.3 per cent) and Nifty Oil and Gas (up by 0.15 per cent), all the other indices are in the red. The Nifty IT, down by 0.9 per cent, is the top loser, followed by the Nifty Private Bank index, down by 0.6 per cent. So, the overall bias in the domestic market seems to be negative.

Futures: The September futures of the Nifty 50 index opened today’s session marginally higher at 17,730, against yesterday’s close of 17,710. However, it could not produce a follow-through rally, and the contract made a U-turn. It has now fallen to 17,610.

But the Nifty futures is trading within the price band of 17,500–17,800, and only if it moves out of this range can we assume the next leg of trend.

If bears gather enough momentum to drag the contract below 17,500, it can slip towards the support at 17,250. On the other hand, if it breaks out of the resistance at 17,800, it can quickly rise to 18,000.

Given the above conditions, one can stay out of the market for now. Since the bias has been bearish today, consider going short only if the contract slips below support at 17,500. Place stop-loss at 17,600 and exit the shorts if the price touches 17,250.

Strategy: Stay out for now. Go short with stop-loss at 17,600 if the contract breaches the support at 17,500. Book profits at 17,250.

Supports: 17,500 and 17,250

Resistances: 17,800 and 18,000

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