Technical Analysis

Nifty call: Tread with caution

Akhil Nallamuthu BL Research Bureau | Updated on May 06, 2021

Nifty 50 May Futures (14,685)

Since the major Asian stock indices were positive today, the Indian equity indices i.e., the Nifty 50 and the Sensex, opened with a gap-up. They then rallied initially but started to lose steam and consequently reversed direction; both the indices are trading with a gain of about 0.2 per cent each. At day’s high the gain was a little over half a per cent. The Nikkei 225 has posted a gain of 1.8 per cent whereas the Hang Seng has gained 0.5 per cent so far.

The market breadth of the Nifty 50 index shows a slight advantage for the bulls as the advance-decline ratio stands at 27-23. The mid- and small-cap indices are trading in the green, up between 0.1 and 0.4 per cent. Among the sectoral indices, the Nifty Auto is the top performer, up by 1.4 per cent followed by the metal index, up by nearly 1.1 per cent. The top losers are the Nifty PSU bank and Pharma index, down by 1.3 and 0.6 per cent, respectively.

Futures: Like the underlying Nifty 50 index, the May futures began the session higher at 14,717 versus yesterday’s close of 14,679. The contract then rallied to hit an intraday high of 14,746. However, the bulls lost traction and as a result the contract started to decline gradually. Currently trading at around 14,680, it has lost all the gains it made so far, and the intraday price action shows that the contract might be falling from here. Nevertheless, 14,660 is a support. Notably, 14,715 can be a resistance as shown by the intraday price action.

Considering the above, traders can wait until either of 14,660 or 14,715 is breached. Take fresh positions along the direction of the break. Above 14,715, the contract is likely to touch 14,800 and then it could rise to 14,865. On the other hand, a breach of the support of 14,660 can drag the contract to 14,600. Subsequent support is at 14,550.

Strategy: Tread with caution

Supports: 14,660 and 14,600

Resistances: 14,715 and 14,800

Published on May 06, 2021

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