The Nifty Financial Services Index is displaying a bullish trend in the near term, yet it is currently facing resistance between the 23,700 and 23,870 levels. With the index closing within this resistance range, a period of profit booking is anticipated. This behaviour is typical when an index approaches significant resistance levels, as traders and investors look to secure profits from the recent upward momentum.
For near-term traders, the optimal strategy is to book profits at current levels, given the proximity to resistance. By locking in gains now, traders can avoid the potential downside risk that comes with the anticipated profit-taking and possible pullback. This strategy not only helps preserve capital but also positions traders to take advantage of future buying opportunities at lower levels.
Once profit booking has occurred and a pullback is underway, attention should shift to the key support levels of 23,450, 23,275, and 23,100. These levels are likely to act as strong support, where buying interest could re-emerge, providing a platform for the index to resume its upward trend. Traders should look to accumulate positions around these support levels, aligning themselves with the overall bullish sentiment and preparing for the next phase of the rally.
It is important to note that a stop-loss should be maintained at 23,900 on a closing basis. This stop-loss level is slightly above the current resistance range, allowing for some volatility while protecting against a potential breakout above resistance, which could alter the current trading strategy. By adhering to this stop-loss, traders can effectively manage their risk and ensure that their positions are safeguarded against unexpected market movements.
In conclusion, the Nifty Financial Services Index is likely to experience profit booking at current levels, given its proximity to resistance between 23,700 and 23,870. Near-term traders should book profits now and wait for a pullback to the support levels of 23,450, 23,275, and 23,100. These levels provide a strategic buying opportunity, in line with the overall bullish trend. Maintaining a stop-loss at 23,900 on a closing basis will help manage risk and protect against adverse market conditions.
(Disclaimer: Ravi Nathani is an independent technical analyst. Views are his own. He does not hold any positions in the Indices mentioned above and this is not an offer or solicitation for the purchase or sale of any security. It should not be construed as a recommendation to purchase or sell such securities.)
First Published: Sep 03 2024 | 6:15 AM IST
