Nifty IT looking for breakout, Auto to underperform; trading strategy here

NIFTY IT Index Analysis:
 

The NIFTY IT Index is currently trading at 35,406.55. In the near term, the index is range-bound on the charts, with a defined trading range between 35,190 and 35,600.

A close above or below these levels would result in a breakout, and the index is expected to follow the direction of the breakout. If the index breaks above the higher range level of 35,600, the next resistance levels to watch would be 35,900 and 36,500.

Conversely, if the index breaks below 35,190, the next support levels on the charts would be 34,850 and 34,500. Given this setup, the best trading strategy would be to wait for a clear breakout from the defined range before taking a position. This approach minimizes the risk of entering a trade prematurely and ensures alignment with the market direction indicated by the breakout.

However, for more aggressive traders, an alternative strategy could be to sell on rises with a strict stop-loss set at the higher range level of 35,600 on a closing basis.

The target for this strategy would be the aforementioned support levels of 34,850 and 34,500. This approach leverages the potential for the index to face resistance near the upper boundary of its current trading range, aiming to capitalize on any subsequent downward movement. Technical indicators should also be monitored closely to support the chosen trading strategy.

A breakout accompanied by strong volume and momentum indicators such as RSI, MACD, and Stochastic can provide additional confirmation of the direction and strength of the move. In summary, the NIFTY IT Index is currently trading within a tight range.

The recommended trading strategy is to wait for a breakout to occur before taking a position, ensuring that trades are made in the direction of the market momentum. For those willing to take on more risk, selling on rises with a stop-loss at the upper range boundary could be considered, targeting the support levels for potential gains.

NIFTY AUTO Index Analysis:

The NIFTY AUTO Index is currently trading at 25,018.90. Despite the overall bullish trend on the charts, the index is expected to underperform in the near term. The best trading strategy in this scenario would be to sell on rises, as technical indicators suggest a pullback.

Support levels on the charts are anticipated around 24,825, 24,550, and 24,150. It's crucial for traders to set a strict stop-loss at 25,500 on a closing basis to manage risk effectively. Given the current setup, the index is likely to face selling pressure and may see further corrections before stabilizing. This pullback should be viewed as a temporary retracement within the larger bullish trend.

Therefore, traders should be prepared to accumulate the index and its constituents once the price approaches the support level around 24,550. This level presents a favorable entry point for long-term positions, aligning with the overall bullish outlook. In summary, the recommended strategy for the NIFTY AUTO Index involves selling on rises with a strict stop-loss at 25,500.

Traders should monitor the support levels at 24,825, 24,550, and 24,150 for potential accumulation opportunities. This approach allows traders to capitalize on the expected near-term weakness while positioning themselves for gains as the index resumes its upward trajectory.

(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.)