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The Indian market seems to be bucking the trend as all the major Asian markets are in red. Although there was a gap-down in the domestic market, the Nifty 50 (17,260) and the Sensex (58,200) recouped the losses and are now up by about 0.5 per cent over the previous close. .
Among the Asian majors, Nikkei 225 (26,725), ASX 200 (6,666) and Hang Seng (16,400) are down in the range of 1.1–1.4 per cent. KOSPI (2,210) is flat for the day.
In the domestic market, the advance/decline ratio of the Nifty 50, at 28/22, is showing a bullish inclination. Mid- and Small-cap indices look mixed as some have gained and others have lost.
Among the sectoral indices, Nifty PSU index is the top gainer, up by nearly 2 per cent, while the Nifty Metal is the top loser, down by 0.8 per cent.
Nifty 50 futures
The October futures of the Nifty 50 index opened today’s session at 17,155 versus last week’s close of 17,196. However, after a weak start, the benchmark bounced back and is now currently trading around 17,260.
While there are positive indications hinting at further rally from the current levels, the contract is likely to remain in the broad range of 16,950–17,430. Until either of these levels are breached, the next leg of trend will be uncertain. Note that it is currently testing a minor resistance at 17,270.
Given today’s positive bias, we expect the Nifty futures to extend the rally to 17,360 and then make a U-turn. There is also a minor possibility for the contract to reverse lower on the back of the hurdle at 17,270.
However, the risk-reward ratio is not favourable for intraday short positions from the current level. That means, participants have to wait before pulling the trigger. Below is our trade recommendation.
Trading strategy
Go short on Nifty futures if it rallies to 17,360. Add more shorts if the uptrend extends to 17,400 and place stop-loss at 17,450 at first.
When the contract falls below 17,250 after shorting, revise the stop-loss down to 17,360. On a fall below 17,100, tighten the stop-loss further to 17,175. Exit the shorts at 17,000.
Note that the levels mentioned may not be achieved intraday. Traders aiming for intraday position can initiate shorts at 17,360 and 17,400 with the same stop-loss mentioned above. But exit at the prevailing price at the end of the day.
Supports: 17,175 and 17,100
Resistance: 17,360 and 17,400
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