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The Indian benchmark indices – the Nifty 50 (18,070) and the Sensex (60,600) – have opened the week on the front foot, with a considerable gap-up. Both the indices have rallied, and are up by 1.2 per cent each for the day so far.
The bullishness is substantiated by the Asian indices, which have also been rising since morning. Among them, Nikkei (25,975), Hang Seng (21,360), ASX 200 (7,150) and KOSPI (2,345) are up in the range of 0.6–2.3 per cent.
So, the day has turned out to be positive for equities, at least so far.
The market breadth of the Nifty 50 index shows a strong bullish inclination as the advances/declines ratio stands at 49/1. Apart from this, all the mid- and small-cap indices have gained. Even among the sectors, barring Nifty consumer durables, down by 0.4 per cent, the rest of the indices are in the green. Nifty IT is the top performer, appreciating 2.5 per cent so far today.
Nifty 50 futures
The January futures of the Nifty 50 index opened at 18,028 versus last week’s close of 17,943. It rallied after opening and is now hovering around 18,180.
Given the current momentum, the contract looks set to extend the rally for the rest of the day. However, the latest 14-day Average True Range (ATR) stands at nearly 200. Meaning, 200 points is the likely movement in either direction from the previous close.
Since the contract has already rallied nearly 200 points, there might be some slowdown in the momentum. We might also see a minor correction.
That said, the nearest resistance from the current level is at 18,200. Subsequent resistances are at 18,280 and 18,340.
On the downside, the contract has supports at 18,100 and 18,000.
Trading strategy
Sentiment is clearly bullish. However, the contract is nearing a resistance at 18,200.
So, wait for now and go long on the breakout of 18,200. Keep stop-loss at 18,100 and look for the target of 18,340.
On the other hand, if the contract falls off 18,200, wait for the dip to 18,100 and then buy. In this case, place stop-loss at 18,000. Books profits at 18,280.
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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