Technical Analysis

The Nifty Call: Nifty 50 May Futures (16,130)

Akhil Nallamuthu |BL Research Bureau | Updated on: May 24, 2022

The Nifty of National Stock Exchange of India Ltd. (NSE) building in Mumbai o | Photo Credit: PAUL NORONHA

A fall below the 16,000 support is highly likely; subsequent support at 15,740

Despite the Asian markets sending out bearish signals, the Indian equity indices, Nifty 50 and Sensex, began the session slightly higher. However, both indices started falling after the open and are now in the negative territory where Nifty 50 (16,170) is down by 0.3 per cent and Sensex (54,200) is down by 0.15 per cent.

Major Asian indices – ASX 200, Nikkei 225, Hang Seng and KOSPI – have depreciated between 0.1 and 1.5 per cent.

Supporting the bearish bias, the advance-decline ratio of the Nifty 50 is currently at 13-37 and all the mid- and small-cap indices are in the red. Notably, India VIX has gone up, indicating increased volatility today. It has shot up by over 7 per cent to 25.15. Thus, the overall sentiment seems inclined to bearish.

Among the sectoral indices, the Nifty Bank is the top gainer, up by 0.4 per cent whereas the Nifty Media is the top loser, down by 1.5 per cent.

Futures: Unlike the underlying Nifty 50, the May futures of the index opened today’s session slightly lower at 16,150 versus yesterday’s close of 16,183. Although it initially rallied to hit an intraday high of 16,236, the contract lost momentum and is currently hovering around 16,130.

The contract will most likely decline from here and is likely to slip below the support at 16,000. Subsequently, it can fall to 15,740. In case if Nifty futures rally from the current level, it can be capped at 16,300.

Notably, the contract has been oscillating in the range of 15,740-16,400 over the past couple of weeks. Thus, there could be a bounce off the support at 15,740.

Considering the above factors, traders can short Nifty futures at the current level of 16,130 and add more shorts when it rallies to 16,300. Initial stop-loss can be placed at 16,400. When the contract falls below 16,000 tighten the stop-loss to 16,150. Exit all the shorts when the price falls to 15,800.

Strategy: Short Nifty futures at the current level of 16,130 and add more shorts when it rallies to 16,300. Initial stop-loss can be placed at 16,400. When the contract falls below 16,000 tighten the stop-loss to 16,150. Exit all the shorts when the price falls to 15,800.

Supports: 16,000 and 15,740

Resistances: 16,300 and 16,400

Published on May 24, 2022
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