 "Nifty Financial, Nifty PSU Bank on an uptrend: How should you trade?")
Nifty Financial Services Index
The Nifty Financial Services Index, which last closed at 20,854, indicates a near-term bullish trend on charts. However, to confirm a positive breakout, investors should wait for the index to break above 20960 on a closing basis.
In the event of a successful breakout, the anticipated targets or resistance levels are at 21200 and 21300. For risk management, a stop-loss is recommended at a close below 20800.
On the contrary, if the index breaks below 20800, the next support levels on charts are expected between 20575 and 20500, with an additional support zone around 20375.
This downside scenario is crucial for traders to monitor as it may signify a shift in the prevailing trend. Given the recent consolidation and two consecutive days of flat closing, the recommended trading strategy leans towards selling on rallies for the near term.
This approach is supported by technical indicators such as RSI and MACD, which are showing signs of weakness.
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To sum up, while the near-term trend is bullish, investors should wait for a confirmed breakout above 20960 for fresh buying opportunities.
Conversely, a break below 20800 might trigger a short sell strategy, considering the consolidation and technical weakness observed.
As always, risk management is paramount, and traders should adapt their positions based on observed price actions and technical indicators to navigate the current market conditions effectively.
Nifty PSU Banks Index
The Nifty PSU Banks Index, which last closed at 7,322, is experiencing a near-term upward trend, gradually moving towards the targets of 7,415 and 7,605. While buying on dips is a plausible strategy at the current market price, the risk-to-reward ratio may not be favorable.
Consequently, the recommended approach is to exercise patience and wait for the index to reach its resistance levels at 7415 and 7605. The suggestion is to initiate profit booking around these resistance levels.
This cautious strategy aligns with the observation that the Relative Strength Index (RSI) is displaying a negative divergence.
A negative divergence in RSI signals a potential weakening of the current uptrend, indicating that the index might experience a quick reversal and find support below 7000.
Given the ongoing rally that is to be completed, providing precise support levels at this stage may not be accurate. Therefore, the advised trading strategy is to wait for the index to rise and begin booking profits around the mentioned resistance levels.
After booking profits, staying in cash for a certain period is recommended. This approach acknowledges the potential vulnerability indicated by the RSI divergence and aims to protect gains while maintaining flexibility for future market movements.
In summary, the Nifty PSU Banks Index is currently in an upward trend, and the trading advice is to wait for the index to reach resistance levels at 7415 and 7605, book profits, and consider staying in cash.
This strategy takes into account the observed negative divergence in RSI, providing a cautious yet strategic approach to navigate the evolving market conditions.
Disclaimer: Ravi Nathani is an independent technical analyst. 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.