Technical Analysis

Nifty call: Tread with caution while the index is volatile

Akhil Nallamuthu | Updated on November 04, 2019

Nifty 50 November futures (11,950)

The broader benchmark Nifty opened slightly higher and inched up during the initial hours of trade. But the bulls seem to have lost steam towards the critical level of 12,000, and the index started sliding subsequently. The Sensex, too, is following a similar price pattern. There is good chance that both Indian benchmarks might witness profit-booking, taking them lower. On the other hand, the Asian markets are giving out mixed signals, as the Nikkei closed marginally in the red, whereas the Hang Seng is up by a percentage point.

Notably, the advances-declines ratio of the Nifty 50 index has a bullish bias, at 30-20. The volatility index, India VIX, indicates higher volatility today, as it is up by a little over 3 per cent at 16.25. The sectoral indices, too, are giving out mixed signals -- the Nifty metal is up by 3 per cent and the Nifty media, the top loser, is down by 3 per cent.

The November futures of the Nifty 50 index opened higher at 11,959 against the previous session’s close of 11,928. After marking an intra-day high of 12,012, the futures started declining and is currently trading around 11,950. As long as the futures stays between 11,900 and 12,000, it is risky to take a directional bet.

Traders with a higher risk appetite could follow a range-trading strategy of buying at the lower limit of the range and selling at the higher limit; but it should be accompanied by a tight stop-loss. For trend following strategies, it is advocated to wait for a decisive break of either 12,000 or 11,900.

Strategy: Tread with caution as the index is witnessing high volatility

Supports: 11,900 and 11,865

Resistances: 12,000 and 12,040


Published on November 04, 2019

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