I short two lots of Fin Nifty futures at 21,650 and exited one lot at 21,250. Can I hold the other lot? Will the fall continue?

Yugesh

Nifty Financial Services (21,094.15): Nifty Financial Service (Fin Nifty) slipped below the 20-day moving average (DMA) last week and is now hovering around the 50-DMA. It has a strong support at 21,000, where a rising trendline coincides.

Similarly, the May Fin Nifty futures (21,175.75) is now trading near a considerable support at 21,100.

Since the fall during the last week has been sharp and that there is support ahead for the contract, there is a good chance for it to see a rally, at least a corrective one. Such a move can lift Fin Nifty futures to 21,500 – its 20-DMA.

Note that Fin Nifty futures has been moving up across a rising channel since February. So, until the support at 21,100 is taken down, the channel will remain valid, and the bulls will have a chance to turn the tide in their favour.

If the contract recovers on the back of 21,100 and breaks out of 21,500, the uptrend might resume. Resistance above 21,500 is at 22,000. On the other hand, if Fin Nifty futures falls below the support at 21,100, a new leg of downtrend is likely to be established. Support below 21,100 can be spotted at 20,900 and 20,750.

To sum up, the next swing in price for Fin Nifty futures will depend on which level among 21,100 and 21,500 price levels will be invalidated first.

Considering the above, our suggestion would be to exit the remaining lot that you hold. Fresh positions can be initiated after Fin Nifty provides some clarity on the chart.

Initiate fresh short position when Fin Nifty futures breach the support at 21,100. Place initial stop-loss at 21,300. When the contract falls to 20,900, modify the stop-loss to 21,100. Book profits at 20,750.

However, if Fin Nifty futures recover and rally past the hurdle at 21,500, consider going long. Target and stop-loss can be 22,000 and 21,230 respectively.

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