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Nifty 50 (18,075) and Sensex (61,300) opened the session with gains, tracking positive cues from the Asian market, but later lost momentum, with both indices declining by approximately one-third of a percent.
Among their Asian peers, except for Hang Seng (19,480) which declined by 1.2 percent, Nikkei 225 (30,800), ASX 200 (7,280), and KOSPI (2,535) recorded gains ranging between 0.5 and 0.8 percent.
For the last few sessions, the domestic market has been facing selling pressure, despite positive sentiment across the markets in Asia.The market breadth i.e., the advance/decline ratio of Nifty 50 stands at 11/39, signalling a negative sentiment.
Further, all the mid- and small-cap indices seem to be in the red, indicating broader sell-off.
Also read: Mutual funds bought and sold these top stocks: Do you own any?
The above factors indicate that the domestic market is weak, increasing the likelihood of further decline from current levels.
Nifty 50 futures
In line with the gap-up opening for the underlying Nifty 50, the May futures of the index opened the day higher at 18,210 against yesterday’s close of 18,175. However, after marking a high of 18,212, the contract started to fall. It is currently hovering around 18,120, down by 0.3 per cent.
The probability of a further fall is high due to the contract is trading below a support level of 18,160. Although 18,120 is a minor support, it might not be able to arrest the fall due to a strong downward momentum. We might see a minor corrective rally to 18,160 on the back of this support but not beyond that. The Nifty futures might decline and touch 18,000 today.
On the other hand, if the contract manages to rally past 18,160, the upswing can extend to 18,200.
Trading strategy
As the downward momentum is strong, we recommend traders to go short now. Sell the contract at 18,115. Add shorts if the price inches up to 18,160, with an initial stop-loss at 18,210.
When the contract falls to 18,050, tighten the stop-loss to 18,110. Book profits at 18,010.
Note that this is an intraday trade call. Close the trade just before the end of the session, irrespective of the price at which the contract trades at the time.
Supports: 18,000 and 17,930
Resistances: 18,160 and 18,200
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