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The Indian benchmark indices, Nifty 50 (18,065) and Sensex (60,675), after opening slightly higher, have pulled back and are trading around yesterday’s closing level. But the equity market across Asia looks positive, trading in the green. Among the major indices, Nikkei 225 (25,825), ASX 200 (7,070), Hang Seng (21,050) and KOSPI (2,260) are up in the range of 0.2–1.2 per cent.
Nevertheless, the domestic market does not seem to have taken inspiration from the Asian markets and remain flat for now. That said, the market breadth of the Nifty 50 index appears bullish as the advance-decline ratio stands at 37-13.
However, the mid- and small-cap indices look mixed as some have gained and the rest are down so far. So are the sectoral indices. Among them, Nifty FMCG is the top performer, up by 1.7 per cent, whereas Nifty Financial services is the top loser, down by 0.7 per cent so far today.
Nifty 50 futures
The January futures of the Nifty 50 index opened higher at 18,155, versus yesterday’s close of 18,103. It is currently hovering around 18,150.
The price action since early December shows the Nifty 50 index on a downtrend, and yesterday’s fall appears to show that the index has formed a lower high again and is set to fall further.
However, the index and, consequently, its futures (January expiry) have a considerable support at 18,100. Also, the chart shows that the contract has largely been moving in the 18,100-18,340 range since last week.
Therefore, the probability of a rebound and the support breaking at 18,100 appears equal.
If there is a bounce, the contract could retest 18,300 in a day or two. But if the support at 18,100 is breached, there could be a swift fall to 18,000 and even further to 17,900.
Trading strategy
Considering the possible movement in Nifty futures from here, traders can consider taking positions on both sides.
That is, one on the back of the support at 18,100, go long at the current level of 18,130. But place a tight stop-loss, at 18,075. Exit if the contract rallies to 18,300
If the contract falls below 18,100 and triggers our stop-loss for the longs (18,075), then that would largely mean it could fall further. Short Nifty futures with stop-loss at 18,170. When the contract touches 18,000, tighten the stop-loss to 18,100. Exit the shorts at 17,940.
Note that the above trade recommendations are for intraday. So, exit the positions by the end of the day if either target or stop-loss levels are not hit.
Supports: 18,100 and 18,000
Resistance: 18,200 and 18,280
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