Trade Setup – Nifty April Futures (Kumo BreakOut)

Among the indices, the Nifty has been eluding us for quite some time now. The last time, it broke out of the Kumo on the bearish side. However, a pullback was seen as soon as the Chikou found support at the Senkou Span A, the Kumo top.

The Nifty made consecutive attempts at breaching the Kumo on the pullback, however, could not do so and resumed its downtrend.

While the current setup is not the best of the trades, we can take a trade in anticipation that the Nifty will break the Kumo on the downside. We will work on a tight stop loss for the trade and initiate the position.

Entry, Stop Loss & Take Profit

Nifty Trade Setup - Anticipatory Kumo Breakout

Nifty Trade Setup – Anticipatory Kumo Breakout

I suggest that we watch the early moves of the Nifty on Monday and then initiate the trade once the Nifty is below yesterday’s close. In case the market pre-open indicates a start at a significant discount, then we can place an entry at the opening tick.

The Stop Loss for this trade should be at 8762. This level is the future Kumo top and more importantly, the level of the Kijun Sen before it took the plunge down.

I am expecting significant support at the Kumo’s bottom at around 8595 and more so when the Chikou hits the Kumo bottom at around 8514. In case the Nifty clears, these resistance levels then we can expect a profit target of 8440 followed by 8340. Both of these levels are Fibonacci extension levels of the original downtrend. The immediate target for the Nifty is at 8595 followed by 8542.

The risk reward ratio for this trade is at a 1:2.3


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