Global Equities Sell off on Plunging Oil Prices- Your Trading Strategy

Key Points Suggesting Global Sell off:

  • June WTI oil contract collapsed by more than 45% intraday at $ 11 per barrel on Tuesday.
  • U.S. Senate passes $484 billion package to support the small businesses & corona virus testing.
  • Asian Markets opened negative on the back of plunging oil prices.
  • SGX Nifty suggesting that Indian markets will start in red at around 8900 level.
  • Facebook will invest Rs. 43574 crore into Reliance Jio platform by acquiring a stake of 9.99% in the company

Global equities are tumbling on the back of plunging oil prices. The fall started with the sharp drop in West Texas intermediate (WTI) May future contract to -$ 37.63 barrel on Monday.

There was no respite in drop of oil prices on Tuesday. As intraday slide in June WTI contract was 45% to $ 11 per barrel. This is happening on the back of lock down in economical activities all over the world due to virus pandemic.

Oversupply in crude oil has left with no storage capacity with the producers are putting pressure in the oil prices.

US equity markets have tumbled two days in row. All the major U.S. indices have seen a deep cut of more than 5% in two sessions. Yesterday U.S markets ignored a positive news “U.S. Senate passes $484 billion package to support the small businesses & corona virus testing” .This has put pressure on Asian Markets too and they are all falling in similar manner.

IndicesCurrent ValuePrev. Close% Change
U.S. Markets
Nasdaq (Apr 21)8263.238560.73-3.48%
DJI (Apr 21)23018.8823650.44-2.67%
S&P 500 Index2736.562823.16-3.07%
European Markets
FTSE (Apr 21)5641.035812.83-2.96%
CAC (Apr 21)4357.464528.3-3.77%
DAX (Apr 21)10249.8510675.9-3.99%
Asian Markets
Nikkei (Apr 22)19050.3319280.78-1.20%
Straits Times (Apr 22)2519.392551.92-1.27%
Hang Seng  (Apr 22)23618.6323793.55-0.74%
Kospi (Apr 22)1859.051879.38-1.08%
Jakarta Composite (Apr 22)4494.534501.92-0.16%
Shanghai Composite (Apr 22) 2829.392827.010.08%
SGX Nifty (Apr 21)89128964-0.58%
Data: Money Control, Time: 8.19 A.M.

Strategy For the Day Supporting Global Equities Sell off

Today Indian markets will open in red on the back of global cues but shorting on opening is not prudent. As today, Nifty heavy weight Reliance Industries have come out with a positive news ” Facebook will buy 9.99% stake in Reliance Jio for Rs 43,574 cr

So in our opinion, In first half an hour we must have a look on Nifty price action and then decide to short the market. Trade should be on Negative side only, as all Global markets are negative. Just keep an eye on Reliance Industries share if it is moving up then shorting is not prudent strategy because of its high weight in Nifty. And you may incur loss.

We recommend to short the market at around 8950 level and look for target of 8880 level. Stop loss at 9000 level.

(This strategy should be used once weakness set in at higher level)

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