Weekly charts reveal a bearish trend for Nifty 50: Here's how to trade

Nifty 50 Index

The Nifty 50 Index, currently trading at 22,147.00, has experienced a notable correction of approximately 1000 points in the near term. However, it has also shown signs of recovery, rebounding more than 350 points from its recent lows. Despite this, the index closed the week with a negative return of 1.65 per cent. 

From a technical perspective, the chart pattern suggests that the bullish trend remains intact as long as the index does not breach the crucial support level of 21,700 on a closing basis. However, analysing the Relative Strength Index (RSI) on weekly charts reveals a bearish signal, characterised by a pattern of lower tops and lower bottoms. 

This indicates that selling pressure may emerge at resistance levels. The resistance levels to watch for are within the range of 22,276 - 22,325 and 22,475 - 22,525. In light of the bearish signals from technical indicators like the RSI and Moving Average Convergence Divergence (MACD), the recommended trading strategy would be to sell on rallies. 

This approach aligns with the expectation of underperformance in the short term. On the downside, support levels are anticipated at 21,965, 21780, and 21,500. For swing traders and investors, these levels present opportunities to consider buying the index and its constituents. 

Monitoring the index's behaviour around these support levels can provide strategic entry points for those looking to capitalise on potential rebounds. In summary, while the Nifty 50 Index maintains its bullish trend barring a breach of key support, caution is warranted due to the bearish signals from technical indicators. 

Selling on rallies is advisable, with a focus on support levels for potential buying opportunities for swing traders and investors. As always, traders should remain vigilant and adapt their strategies in response to changing market conditions.

Nifty Midcap Select Index

The Nifty Midcap Select Index, currently trading at 10667.60, presents a bearish outlook in the near term, suggesting a sell-on-rise approach as the optimal trading strategy. 

Technical indicators such as the Relative Strength Index (RSI), Stochastic oscillator, Moving Average Convergence Divergence (MACD), and near-term moving averages collectively indicate a downward trend. 

A discernible pattern of lower tops and lower bottoms is anticipated in the upcoming week, signalling potential selling pressure and a continuation of the downtrend. Resistance levels are projected to materialise around 10770 - 10875 and 11050. 

Traders are advised to capitalise on these resistance levels by selling the index and its constituents. Conversely, support levels on the charts are expected to be found around 10564 - 10464 and 10280. 

These levels may serve as strategic points for managing risk and considering potential buying opportunities for contrarian traders or investors. In summary, a sell-on-rise strategy is recommended for the Nifty Midcap Select Index, given the prevailing bearish signals from technical indicators. 

Traders should closely monitor price action around resistance and support levels to inform their trading decisions and effectively navigate market conditions. As always, risk management and adherence to trading discipline remain paramount in executing successful trading strategies.

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