 "Nifty IT index likely to rebound, Nifty Auto may weaken; suggest charts")
Nifty IT Index
The Nifty IT Index, currently trading at 33,574.95, has undergone a significant correction in the near term, leading to its decline to a support level within the range of 33,400 - 33,300. Within this range, the index is expected to find support, potentially halting the selling pressure and paving the way for a technical bounce or swing trading opportunity.
Given the support level identified, the recommended trading strategy would be to consider buying the index and its constituents within the range of 33,400 - 33,300. This strategy aligns with the anticipation of a rebound in prices from the identified support levels.
Traders targeting a bounce from these support levels may set their sights on potential targets of 34,500 and 35,300. These levels represent areas where upward momentum may be expected to resume, providing opportunities for profitable trades.
It's worth noting that technical indicators such as the RSI and stochastic have reached oversold levels, indicating that selling pressure may have been exhausted. This consolidation phase may precede a bounce, further supporting the case for buying at dips within the identified support range.
By capitalizing on the potential rebound from the support levels and leveraging the opportunities presented by technical indicators, traders can position themselves to benefit from the anticipated recovery in the Nifty IT Index, while managing risks effectively.
As always, it's important for traders to conduct thorough analysis and adhere to their risk management strategies when executing trades in the market.
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Nifty Auto Index
The Nifty Auto Index, currently trading at 21,703.05, is anticipated to face challenges in the near term, suggesting an underperformance compared to the broader market. As such, it's prudent for traders to consider a cautious approach and adopt appropriate trading strategies to navigate the market conditions effectively.
Given the outlook for potential underperformance, one of the recommended trading strategies is to book profits at the current market price (CMP) or to sell on any rallies or at CMP. It's essential to implement a strict stop-loss strategy, with a suggested level set at 22,275 on a closing basis. This stop-loss level serves to mitigate risks and limit potential losses in case the market moves unfavorably.
The first level of support on the charts is anticipated around 21,000. This level assumes significance as the Relative Strength Index (RSI) has dipped below 70, indicating a potential for a panic sell-off or sharp correction in the near and short term. Should the index breach the 21,000 level, the next support on the charts is projected to be around 20,575. Given these conditions, it's advisable to exercise caution and refrain from establishing bullish positions in the index and its constituents.
Instead, traders may consider adopting a defensive stance by either selling their existing positions or staying in cash. Additionally, building short positions could be a viable strategy to capitalize on potential downward movements in the index.
In summary, the prevailing market conditions suggest a bearish outlook for the Nifty Auto Index in the near term. Traders are advised to remain vigilant, adhere to risk management principles, and adjust their trading strategies accordingly to navigate the evolving market dynamics effectively.
(Ravi Nathani is an independent technical analyst. Views expressed are personal).