Nifty call: Go long on rally above 10,435 with tight stop-loss

Nifty 50 January Futures (10,393) Taking bearish cues from the plunge in the global markets, the Nifty and Sensex opened the session with a large gap-down. The indices continue to trade in negative territory. All the sector indices have fallen more than 2.2 per cent and the Bank Nifty and Nifty Realty sectors are the top laggards, tumbling 2.8 per cent and 3.4 per cent respectively.

On the other hand, the India VIX has jumped 26 per cent in today's session, indicating high volatility. The market breadth of the Nifty index is completely biased towards declines. The Nifty February futures contract started the session with a gap-down at 10,318. After recording an intra-day low of 10,300, the contract began to recover and has bounced up more than 100 points, currently trading at 10,412 levels. The contract recorded an intra-day high at 10,435.

As the contract is recovering from oversold territory, the corrective rally can prolong. Traders should tread with caution and consider taking long positions in a rally above 10,435 with a fixed stop-loss. In that case the contract can extend its corrective rally to 10,475 and 10,500 levels. However, if the contract fails to move beyond 10,435, selling pressure can pull the index down to 10,350 and 10,300 levels once again.

Strategy: Go long on a strong rally above 10,435 with a tight stop-loss.

Supports: 10,350 and 10,300

Resistances: 10,435 and 10,475

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