Technical Analysis

Strong resistance seen at 16,060 for Nifty and at 54,500 for Sensex

There is some relief for the Indian benchmark indices. Both the Sensex and Nifty 50 have bounced back, recovering some of the losses made on Friday. The Sensex is up 0.75 per cent at 53,195. The Nifty is at 15,904, up 0.76 per cent.

But the big question is whether the bounce can sustain and whether the indices will see a strong follow-through rise. We will have to wait and watch.

The Nifty has strong resistance at 16,060 and the Sensex at 54,500. A strong break above these hurdles is needed for the indices to see an extended corrective rise this week. Considering the price action on Friday, the failure to sustain the gap-up open indicates the presence of strong sellers at higher levels. So, there is a high chance that the Nifty and Sensex will remain below 16,060 and 54,500 respectively.

The Asian markets are trading mixed. The Nikkei 225 (26,557) is up 0.49 per cent, while the Hang Seng (19,920) is up marginally by 0.12 per cent. The Shanghai Composite (3,073) and the Kospi (2,601) are down 0.38 and 0.07 per cent respectively.

In the US, the Dow Jones Industrial Average (32,196, up 1.47 per cent) had risen sharply on Friday. Any further rise from here can face strong resistance in the 32,800-33,000 region. A pull-back, thereafter, can drag the Dow down to 30,500-30,000 in the coming days.

Futures: The Nifty 50 May (15,940) futures contract is up 0.97 per cent. The contract made a high of 15,977 and has come-off slightly from there. The immediate resistance is at 16,000 and then in the 16,050-16,100 region. The upside is likely to be capped at 16,100 if the contract manages to break above 16,000 in the coming sessions.

Support is at 15,750. A strong break below it can drag the Nifty May futures contract down to 15,680 initially and then to 15,500 or lower .

Traders can go short now and on a rise at 16,040. Keep the stop-loss at 16,120. Trail the stop-loss down to 15,910 as soon as the contract moves down to 15,830. Move the stop-loss further down to 15,770 as soon as the contract falls to 15,720. Book profits at 15,690.

A strong rise past 16,100 is necessarily needed to ease the downside pressure and take the contract further up to 16,200 and 16,400 levels again.

Trading Strategy: Go short now and at 16,040. Keep the stop-loss at 16,120 for the target of 15,690. Trail the stop-loss down to 15,910 as soon as the contract moves down to 15,830. Move the stop-loss further down to 15,770 as soon as the contract falls to 15,720.

Supports: 15,750 and 15,680

Resistances: 16,000 and 16,050

Published on May 16, 2022