Nifty Call: Go short on rallies at 10,765 and 10,780 with a stop-loss at 10,805

Nifty 50 May Futures (10,748)

The uncertainty prevailing over the formation of government in Karnataka is continuing to weigh on the markets. The outcome of the Karnataka Assembly elections dragged the index futures from its intraday high of 10,948 to 10,818 at the close of the session on Tuesday.

The sell-off is keeping the index futures under pressure today as well and the contract opened with a wide gap-down at 10,770 and fell to a low of 10,721. Though the contract has bounced back from this low, it is likely to remain under pressure. Any intermediate upmove is likely to find sellers at higher levels.

Immediate resistance is in the 10,760-10,770 region and the next significant resistance is poised at 10,790. Though a test of these resistances cannot be ruled out during the day, the upside is likely to be capped at 10,790.

An eventual pull-back from these resistances will see the contract falling to 10,730 or even 10,700. A strong break below 10,700 will increase the likelihood of the fall extending to 10,650 or even lower thereafter.

Short-term traders with high risk appetite can go short on rallies at 10,765 and at 10,780. Stop-loss can be placed at 10,805 for the target of 10,705. Revise the stop-loss lower to 10,750 as soon as the contract moves down to 10,740.

The downside pressure will ease only if the index futures breaks above 10,800 decisively. The next targets are 10,820 and 10,855.

Strategy:  Go short on rallies at 10,765 and 10,780 with a stop-loss at 10,805

Supports: 10,730, 10,700

Resistances: 10,770, 10,790




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