The Indian benchmark indices opened with a gap-down and are trading lower as the sharp reversal seen on Friday seems to be gaining momentum.
Sensex (59,112) was down 0.9 per cent, while Nifty 50 (17,590) was down 0.95 per cent at the time of filing this report.
Nifty has declined sharply below 17,800 and is now under pressure to test 17,450. Thereafter a short-lived bounce to 17,600 cannot be ruled out. Strong resistance will now be in the 17,685-17,700 region.
Global indices
In Asia, the major indices are trading mixed. Nikkei 225 (28,771) and Kospi (2,464) are down 0.54 and 1.2 per cent, respectively. On the other hand, Shanghai Composite (3,276) and Hang Seng (19,812) are up 0.57 and 0.2 per cent, respectively.
In the US, the Dow Jones Industrial Average (33,706.74) was down 0.86 per cent on Friday. Inability to bounce from here can drag the index down to 33,200-33,000 this week.
Nifty 50 Futures
The Nifty 50 August Futures (17,585) is down 0.9 per cent. The outlook is bearish. The contract can test 17,500. A break below this level can take it further down to 17,400. Resistances are at 17,650 and 17,700.
Traders can go short at current levels. Accumulate shorts on a rise at 17,645. Keep the stop-loss at 17,715. \
Trail the stop-loss down to 17,560 as soon as the contract falls to 17,510. Move the stop-loss further down to 17,480 as soon as the contract falls to 17,440. Book profits at 17,415.
The contract has to rise past 17,700 to ease the downside pressure. But that looks unlikely at the moment. Any intermediate rise is likely to find fresh sellers coming into the market.
Trading strategy
Go short now and accumulate shorts at 17,645. Keep the stop-loss at 17,715 for the target of 17,415. Trail the stop-loss down to 17,560 as soon as the contract falls to 17,510. Move the stop-loss further down to 17,480 as soon as the contract falls to 17,440.
Supports: 17,500, 17,400
Resistance: 17,650, 17,700