Nifty Energy to face stiff resistance at 40,000; Pharma seems range-bound

According to Ravi Nathani, an independent technical analyst, the Nifty Energy index is trading in overbought zone, hence some reversal can be anticipated.

Nifty Energy Index

Outlook: Book profits on the rise

The Nifty Energy Index currently faces a formidable challenge as it approaches the stiff resistance level of 40,000. Several technical indicators signal an overbought condition, with the near-term Relative Strength Index (RSI) hovering at 70. This suggests a potential reversal in the near term, prompting a cautious trading strategy.

Given the overbought status, it is prudent for traders to consider profit booking on each upward movement. This approach aligns with the anticipation of profit-taking activities in the market. The heightened RSI level of 70 further underscores the potential for a corrective pullback.

 

While the resistance at 40,000 presents a challenging barrier, support levels are identified around 39,500 - 39,150. These support zones could act as cushions, potentially mitigating downside risks.

Traders should closely monitor price movements around these support levels for potential trend reversals. Considering the current technical landscape, a conservative trading strategy involves booking profits at resistance levels and maintaining a cash position.

This approach positions traders to capitalize on potential pullbacks and capitalize on market opportunities as they arise.

In conclusion, the Nifty Energy Index exhibits signs of being overbought, with resistance at 40,000 and support around 39,500 - 39,150. Adopting a cautious strategy by booking profits and staying in cash aligns with the current technical outlook, anticipating a possible pullback in the near term.

Nifty Pharma Index

Outlook: Range bound on charts

The Nifty Pharma Index currently exhibits a range-bound pattern with key levels identified at 18,825 on the upside and 18,400 on the downside. A decisive close above or below this range is anticipated to act as a triggering point, suggesting a potential directional move.

In the absence of a breakout, a prudent trading strategy for traders is to consider buying near the established support level of 18,400 and selling near the resistance level of 18,825.

This approach allows traders to capitalize on the price oscillations within the identified range. In the event of an upward breakout, the next immediate resistance levels to monitor are projected at 19,025 and 19,400.

Traders should closely observe price movements and trading volumes to confirm the strength of the breakout. Conversely, if the index breaches the lower end of the range, the subsequent support levels are identified at 18,200 and 17,800.

Monitoring these support levels is crucial for assessing the potential downside risk and confirming the validity of a breakdown.

In summary, the Nifty Pharma Index currently demonstrates a range-bound behavior with key levels at 18825 and 18400. Traders are advised to adopt a buy near support, sell near resistance strategy until a decisive breakout occurs. Monitoring the index's behavior at the identified support and resistance levels will guide traders in making informed decisions based on potential trend developments.

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