Nifty 50 Index
The Nifty 50 Index is currently exhibiting a bullish trend on the charts. However, the recent rally has propelled the index close to overbought levels, indicating a potential for encountering stiff resistance around the 25,375 mark. This level is critical, as it represents a significant resistance point where the upward momentum might face challenges.
Given this scenario, traders are advised to approach the market with caution. A strict stop-loss should be placed at the resistance level of 25,375. This stop-loss will help protect profits and manage risk, ensuring that gains from the recent rally are preserved.
Traders should consider booking profits in the very near term at these elevated levels to lock in gains before any potential pullback occurs. A pullback from these resistance levels is expected, providing a more favorable entry point for traders looking to accumulate positions in the Nifty 50 Index.
The key support levels to watch for accumulation are 25,025 and 24,825. These levels are anticipated to act as strong support, offering a good opportunity for traders to buy on dips, aligning with the overall bullish trend observed on the charts. It is crucial to note that short selling should be avoided in the current market environment, given the overall bullish trend of the Nifty 50 Index.
The primary strategy should be focused on buying during pullbacks, as the trend remains positive, and any decline is likely to be temporary. By waiting for the index to pull back to support levels, traders can position themselves to benefit from the next upward move.
Nifty Midcap Select Index
The Nifty Midcap Select Index has recently approached its resistance level at 13,200. This significant level is likely to act as a barrier to further upward movement, causing the index to halt its bullish stance temporarily. Given the strength of this resistance, a pullback in the near term is expected, which could provide more attractive buying opportunities for traders.
For near-term traders, the best strategy would be to book profits at the current market price, given that the index is now at a critical resistance point. Taking profits now allows traders to lock in gains from the recent bullish run and avoid the potential downside associated with the anticipated pullback.
This proactive approach helps to manage risk and secure gains in an uncertain market phase. Traders should avoid short-selling the index at this stage, as the overall trend remains positive. Short-selling in a broadly bullish market can be risky, and the potential for a pullback does not necessarily imply a reversal of the uptrend.
Instead, traders should be patient and wait for the pullback to materialize, using it as an opportunity to accumulate positions at lower levels.
Key support levels to watch during this pullback phase are 12,960, 12,810, and 12,700. These levels represent potential entry points where the index may find buying interest, providing a solid base for the next upward movement.
Accumulating the index and its constituents around these support levels allows traders to capitalize on the broader bullish trend while minimizing downside risk.
(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.)
First Published: Sep 02 2024 | 6:44 AM IST
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