Technical Analysis

Nifty call: Tread with caution as the risk-reward is not favourable at current levels

Akhil Nallamuthu | Updated on November 25, 2019

Nifty 50 November Futures (12,015)

The Indian benchmark indices are on the rise today, tracking the positive sentiment in other Asian markets. The Nifty and the Sensex are up 0.8 per cent, taking cues from the Nikkei, which rose 0.7 per cent and the Hang Seng index, which gained 1.6 per cent today.

The decline in the November futures contract of the Nifty 50 index on Friday was arrested by support at 11,900; it closed the week just above that level at 11,914. In today’s session, backed by the support and the risk-on sentiment, the futures contract has been rising since the session open, and is currently trading above the critical level of 12,000.

The market breadth of the Nifty 50 index is inclined towards bulls, as the advances-declines ratio stands at 40-10. India VIX, the volatility measure, is at 14.3, down by a substantial 3.7 per cent. All sectoral indices, except the Nifty media index, has appreciated today, with Nifty metal the top performer, up by 2.4 per cent. Hence, the market seems to be bullish on a broader basis, suggesting that the likelihood of an intra-day reversal is low.

Though the rally appears strong, it is to be noted that the contract is still trading within a range between 11,835 and 12,070. At the current level, the risk-reward is not favourable for both long and short positions. Hence, traders are recommended to stay away from initiating fresh positions.

Strategy: Tread with caution as the risk-reward is not favourable at current levels

Supports: 11,935 and 11,900

Resistances: 12,070 and 12,126

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Published on November 25, 2019

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