The Nifty Call: Go short on a rise at 17,870 and 17,900

Nifty 50 August Futures (17,840)

The Indian benchmark indices have opened on positive note after a long weekend. Both the Nifty 50 (17,821) and Sensex (59,880) are up 0.7 per cent each. Nifty has come inside the crucial 17,800-17,900 resistance zone. Inability to breach 17,900 can be a bearish signal going forward. A strong reversal from around 17,900 can drag the index down to 17,600 and even lower in the coming days. As such the price action in the coming sessions will need a close watch.

Global indices

All major Asian indices are trading in green. Nikkei 225 (28,875) is trading flat while Shanghai Composite (3,284), Hang Seng (20,064) and Kospi (2,536) are all up in the range of 0.11 to 0.35 per cent.

In the US, the Dow Jones Industrial Average (33,912) was up 0.45 per cent on Monday. It has a strong resistance at 34,000-34,200. A pull back from this resistance zone will be bearish to see 33,000 and lower levels. The price action in the next few days will need a close watch.

Nifty Futures

The Nifty 50 August Futures (17,840) is up 0.71 per cent. Strong resistance is at 17,910. A pullback from there and a subsequent fall below 17,800 will be bearish. In that case, the contract can fall to 17,700-17,650 in the next few days.

Trading Strategy

We prefer to take a positional trade at the moment. Go short on a rise at 17,870 and accumulate at 17,900. Keep the stop-loss at 18,035. Trail the stop-loss down to 17,850 as soon as the contract falls to 17,780. Move the stop-loss further down to 17,770 when the contract touches 17,710. Exit the shorts at 17,660.

A strong break and a decisive close above 17,910 is needed to negate the above-mentioned fall. In such a scenario, a further rise to 18,000 and even higher can be seen.

Supports:17,800, 17,650

Resistances: 17,910, 18,020

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