Nifty MidCap, SmallCap indices flashing signs of caution

Here's why Ravi Nathani, an independent technical analyst, recommends to book profit in Nifty Midcap 50 and Smallcap 100 indexes.

Nifty MidCap 50 Index Analysis

The Nifty Midcap 50 Index closed at 11,554.55, prompting a cautious approach among swing traders and investors. To mitigate potential losses, it is advisable to implement a strict stop loss at 11,625 on a closing basis. 

Prudence suggests that both swing traders and investors should consider booking profits at the current market price or on any upward movements. In the event that the index surpasses 11,625, the next resistance levels are anticipated between 11,715 and 11,800. 

An overbought zone is projected between 11,936 and 12,280, indicating a potential area of caution for traders. Chart analysis reveals potential support levels around 11,200, 11,109, and 10,900. If the index dips below 10,900, the subsequent support zone is likely to range from 10,615 to 10,325. Within this range, an oversold stage is anticipated. 

Investors and swing traders are encouraged to consider accumulating the index and its constituents between 10,615 and 10,325. In summary, exercising caution is paramount. Holding long positions in the index and its constituents should be avoided at current stage. 

By staying vigilant, adhering to stop loss levels, and carefully assessing support and resistance points, traders can navigate the market landscape with prudence, making informed decisions aligned with the prevailing market conditions.

Nifty SmallCap 100 Analysis

The current market price for the Nifty Small Cap 100 is 13,303.15. In the near term, a vigilant trading strategy is imperative. Setting a strict stop loss at 13,425 on a closing basis provides a safeguard against potential losses. Traders are encouraged to adopt a cautious approach, considering booking profits as a prudent move. 

Chart analysis indicates crucial support levels at 13,016, 12,916, and 12,736. Monitoring these levels is vital, as a breach could signal a shift in market sentiment, potentially leading to further declines. 

Furthermore, it is pivotal to observe the index's behavior around the 13,425 mark. If the index manages to close above this level for two consecutive days, it might encounter its next resistance around 13,836. 

Given this scenario, traders are advised to exercise careful judgment and refrain from building long positions on upward movements. 

In summary, a vigilant and cautious trading approach is recommended for the Nifty Small Cap 100. By adhering to strict stop loss levels, monitoring support points, and avoiding hasty long positions, traders can navigate the market with prudence and make well-informed decisions in response to evolving market dynamics.

(Ravi Nathani is an independent technical analyst. Views expressed are personal).