Technical Analysis

Gurumurthy K | BL Research Bureau | Updated on: May 10, 2022

Remain on the sell side of the market rather than buying at the current levels

Sensex and Nifty 50 are managing to stay afloat. Both the indices have managed to bounce back above their key supports. Nifty is trading above its support at 16,275 and Sensex above 54,400. It is important to see if they can sustain higher.  Nifty has to rise past and 16,400 and Sensex above 55,000 to gain momentum for a corrective rise. Otherwise, they can remain vulnerable to seeing a fresh fall here without seeing a corrective bounce. As such, we will have to wait and watch. The broader picture is still weak. So, we reiterate to remain on the sell side of the market rather than buying at current levels.

Except for Shanghai Composite (3,021.95, up 0.57 per cent) all other major indices are trading in the red. Hang Seng (19,571) is down sharply by 2.15 per cent. Nikkei 225 (26,153) and Kospi (2,591) are down 0.63 and 0.7 per cent respectively.

In the US, the Dow Jones Industrial Average (32,245) fell sharply by about 2 per cent. It has declined below 32,500 and can now test the next crucial support at 32,000. It will have to be seen if the Dow manages to bounce back from 32,000 or not.

Futures: The Nifty 50 May (16,330) Futures contract up 0.19 per cent.  It has been stuck in a narrow range of 16,200-16,420. A breakout on either side of this range will determine whether the contract can move up or resume the fall from here. A break above 16,420 can rise to 16,550-16,600 in the coming sessions. On the other hand, a break of 16,200 and a subsequent fall below 16,150 will be bearish to see 16,000 and 15,850 on the downside.

Traders can stay on the sidelines now. However, a rise to 16,420 can be used for taking fresh short positions. Go short at 16,390 and 16,410. Keep the stop-loss at 16,460. Trail the stop-loss to 16,360 as soon as the contract falls to 16,290. Move the stop-loss further down to 16,280 as soon as the contract touches 16,240 on the downside. Book profits at 16,220.

Trading Strategy: Go short on the rise at 16,390 and 16,410. Keep the stop-loss at 16,460 for the target of 16,220. Trail the stop-loss to 16,360 as soon as the contract falls to 16,290. Move the stop-loss further down to 16,280 as soon as the contract touches 16,240 on the downside

Supports: 16,200 and 16,150

Resistances: 16,420 and 16,550

Published on May 10, 2022