Technical Analysis

Place initial stop-loss at 15,630. When the contract touches 15,200, tighten the stop-loss to 15,320

The Asian markets are sending out bearish signals and following this, the Indian benchmark indices i.e., the Nifty 50 and the Sensex on Friday opened the session with a gap-down. Currently, the Nifty 50 (15,290) and the Sensex (51,330) are down by 0.45 and 0.35 per cent, respectively.

Among the Asian majors, Nikkei 225, ASX 200 and KOSPI have lost in the range of 0.45-1.9 per cent. While Hang Seng is trading positively and is up by about 1 per cent. Nevertheless, the equity market sentiment remains broadly negative, and the domestic market could face more sell-off.

Substantiating this, the market breadth of the Nifty 50 is bearish as the advance-decline ratio is at 12-38; all the mid- and small-cap indices have lost over one per cent each and all the sectoral indices, barring the Nifty Metal (up by 0.2 per cent), are in the red. The Nifty Pharma is the top loser, down by 2.5 per cent.

Futures: Like the underlying Nifty 50, the June futures of the index opened today’s session lower at 15,305 compared to yesterday’s close of 15,349. It initially dropped sharply to hit a low of 15,211 and has recovered to the current level of 15,320.

But the recovery may not sustain, and the contract could either resume the downswing from the current level or after moving up to 15,500.

On the downside, it can depreciate to 15,200 initially and then possibly to 15,000 from where there could be a bounce.

Given the above conditions, one can consider going short on Nifty futures in two legs. That is, short at the current level of 15,320 and add more shorts when it rallies to 15,500. Place initial stop-loss at 15,630. When the contract touches 15,200, tighten the stop-loss to 15,320. Tighten it further to 15,220 when price falls to 15,100. Liquidate all the shorts at 15,000.

Strategy: Go short on Nifty futures in two legs. That is, short at the current level of 15,320 and add more shorts when it rallies to 15,500. Place initial stop-loss at 15,630. When the contract touches 15,200, tighten the stop-loss to 15,320. Tighten it further to 15,220 when price falls to 15,100. Liquidate all the shorts at 15,000.

Supports: 15,200 and 15,000

Resistances: 15,500 and 15,600

Published on June 17, 2022