Buy on dips strategy suggested for Nifty; Check support & other levels here

Nifty 50 Index: Trading Strategy Buy on dips.

 

The Nifty 50 index has been trending downward recently, closing at 23,995.35. This pullback from recent highs reflects growing bearish sentiment as traders monitor the index for signs of further breakdown or a possible bounce from key support levels. With current market sentiment leaning towards caution, short-term volatility may present both risks and opportunities. Immediate support at 23700 is closely watched; this level coincides with recent lows and could act as a temporary floor, offering a potential bounce zone if buying interest resumes here. If the index breaks below 23700, the next significant support level lies at 23,200. This level is expected to attract strong buying pressure due to its psychological and technical significance, serving as a critical threshold for future price action.

 

On the resistance side, the first hurdle for the Nifty 50 lies around 24,500, which has historically capped recent retracements. A break above this could open up a path toward 25,000, a psychological barrier where market participants may hesitate given the broader bearish trend. Technical indicators provide additional insights into the current market structure. The 50-day moving average (MA) is positioned above the current price, signaling ongoing bearish momentum. If prices manage to close above this moving average, it could hint at a potential trend reversal, providing bullish traders with a possible entry signal.

 

Relative Strength Index (RSI) readings below 40 indicate that the index is nearing oversold levels. Should RSI drop below 30, a technical buy signal could emerge, increasing the likelihood of a rebound. Additionally, the MACD (Moving Average Convergence Divergence) indicator shows a bearish crossover, reinforcing the downtrend, although a reversal in this signal would support buying opportunities. Structurally, the index may be in a corrective phase, potentially completing a Wave C of an ABC correction pattern. If this corrective wave ends near 23700, an upward reversal could start a new impulsive phase.

 

Trading Strategy

For short-term traders, the current setup offers opportunities based on critical support levels. Buying opportunities may arise if prices hold above 23700, targeting a move towards 24,500. However, to manage risk effectively, traders should place stop-loss orders below 23,650 to protect against a deeper breakdown. As the index navigates this corrective phase, monitoring these levels and patterns can help traders position themselves effectively amid potential rebounds or further declines.

 

(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.)