Technical Analysis

Nifty 50 and Sensex are currently trading lower by about 1.5 per cent each

Equities market across Asia seems to be under bear grip as all the major indices are in the red. While ASX 200 and Nikkei 225 are down by 1.5 and 1.4 per cent respectively, Hang Seng and KOSPI are down by 1 per cent each. Taking the negative cues, Nifty 50 and Sensex began the session with a gap-down and are currently trading lower by about 1.5 per cent each.

Like the benchmarks, all mid- and small-cap indices are down. For instance, Midcap 50 has lost 1.8 per cent and Smallcap 50 is down by nearly 1 per cent. Exhibiting similar bearish sentiment, all the sectoral indices, barring the Nifty IT (up by 0.1 per cent), are down. The Nifty PSU index is the top loser, down by 3.6 per cent followed by the Nifty Metal, down by 3.3 per cent. And notably, India VIX, the volatility index has shot up by over 5 per cent, to nearly 24. So, the above factors indicate a broad-based selling and thus, the likelihood of the market ending today’s session in the red is high.

Futures: The May futures of the Nifty 50 index opened today’s session lower at 16,020 versus yesterday’s close of 16,178. Since the opening of the day, the contract is on a fall and is currently trading around 15,900. Thus, it has breached the support at 16,000 and it will most probably drop to 15,780 today. However, note that 15,780 is a good support from where there might be a corrective rally. But in case if this level is breached, there could be a sharp fall to 15,500.

So, traders can initiate short at the current level of 15,900 and add more shorts when the contract rallies to 15,960. Place stop-loss at 16,025. Exit the shorts when the price declines to 15,780. Initiate fresh short again if the contract decisively drops below 15,700 with stop-loss at 15,800. Target for this leg of short is 15,500.

Strategy: Go short at the current level of 15,900 and add more shorts when the contract rallies to 15,960. Place stop-loss at 16,025. Exit the shorts when the price declines to 15,780.

Initiate fresh short again if the contract decisively drops below 15,700 with stop-loss at 15,800. Target for this leg of short is 15,500.

Supports: 15,780 and 15,500

Resistances: 16,000 and 16,200

Published on May 12, 2022