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Nifty 50 Index: Bullish Trend with Overbought Signals
The Nifty 50 Index is currently showing a bullish trend on the charts, with the next resistance level at 26,000. Despite the positive outlook, technical indicators reveal that the index has entered an overbought zone. This suggests that a phase of profit booking is likely, particularly on a rise or after the upcoming expiry.
Traders are advised to book profits at higher levels and avoid fresh bullish positions until a pullback occurs. The key support levels to watch on the downside are 25,300, 25,100, and 24,800. These levels are expected to provide buying opportunities for traders looking to enter fresh bullish positions after the profit booking phase.
The ideal strategy for Nifty 50 traders would be to wait for a pullback towards these support levels and then look for buying opportunities to ride the next wave of bullish momentum.
Nifty MidCap Select Index: Failed Breakout and Sell-on-Rise Strategy
The Nifty MidCap Select Index gave a bullish breakout last week from its near-term range-bound movement, signalling positive momentum. However, the breakout quickly turned into a whipsaw, as the bullish move was not supported by technical indicators, which were already positioned in the overbought zone. This lack of technical confirmation caused the index to correct post-breakout, making it more volatile for traders. For near-term traders, the key level to monitor is the 12,980 mark.
A close below this level would trigger two significant events: firstly, it would hit stop-losses for all bullish positions, and secondly, it would initiate a negative breakdown, potentially leading to panic selling. If such a breakdown occurs, the next major support levels are at 12,650, 12,450, and 12,350. Given the current market scenario, a sell-on-rise strategy is recommended for both near-term and short-term traders.
With technical indicators remaining overbought, traders should aim to sell into rallies, with a strict stop-loss set at 13,300 on a closing basis. This approach would allow traders to capitalise on any further corrections while protecting against an unexpected rebound.
Conclusion
The Nifty 50 Index remains bullish but overbought, indicating a possible near-term correction or profit booking. Traders are advised to book profits on the rise and wait for a pullback toward key support levels to initiate fresh long positions.
On the other hand, the Nifty MidCap Select Index has shown signs of weakness after a failed breakout, with a sell-on-rise strategy being the most suitable approach. A strict stop-loss at 13,300 should be maintained, and traders should be cautious of a potential breakdown below 12,980.
(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 23 2024 | 6:26 AM IST
