Technical Analysis

Go long on the contract at the current level of 16,740 and add more longs when price moderates to 16,700

Asian markets are trading in the green and the major indices have rallied in the early trade on Friday. Nikkei 225, ASX 200 and KOSPI are up in the range of 0.4–1.3 per cent. Domestic benchmark indices, tracking Asian peers, opened with a considerable gap-up and are trading positively for the day so far. Nifty 50 at 16,745 and Sensex at 56,330 are up by 0.75 and 0.9 per cent, respectively.

The market breadth of the Nifty 50 is indicating a positive bias as the advance/decline ratio is at 30/20. Similarly, the mid- and small-cap indices are in the green. Sectoral indices, too, are in the green led by the Nifty IT (2.3 per cent) and Nifty Oil & Gas (1 per cent). On the other hand, the Nifty FMCG is the top loser, down by 0.5 per cent.

Futures

Similar to the underlying Nifty 50 index, the June futures opened the session higher at 16,761 compared to yesterday’s close of 16,621. In other words, it has opened above the range of 16,450–16,700 within which it has been oscillating since the beginning of the week.

Given the prevailing price action, the contract, currently trading at around 16,750, is likely to see further rally from here. But it could come down to 16,700 before moving up from the current level . If it sustains above 16,700, the Nifty futures can potentially rally to 16,800 and then to 17,000. On the other hand, if the decline extends below 16,700, it might drop to 16,540.

Nevertheless, traders can consider fresh long positions. That is, buy the contract at the current level of 16,750 and add more longs when price moderates to 16,700. Stop-loss can be placed at 16,580.

When the contract rallies above 16,800, revise the stop-loss up to 16,680. At 16,900, exit half of the longs and move the stop-loss to 16,800. Liquidate the remaining at 17,000.

Strategy: Go long on the contract at the current level of 16,740 and add more longs when price moderates to 16,700. Stop-loss can be placed at 16,580. When the contract rallies above 16,800, revise the stop-loss up to 16,680. At 16,900, exit half of the longs and move the sop-loss to 16,800. Liquidate the remaining at 17,000.

Supports: 16,740 and 16,700

Resistances: 16,800 and 17,000

Published on June 03, 2022