The Nifty IT Index, currently trading at 35,345.00, is exhibiting signs of being overbought on near-term charts.
This overbought status suggests a potential pullback in the index, and various technical indicators, including Bollinger Bands, RSI, and Stochastic, are aligning to indicate an increased likelihood of selling pressure on upward movements.
To navigate these market conditions, a strategic approach involves booking profits at the current juncture and adopting a cautious stance. Traders are advised to exit existing positions and stay in cash for a temporary period.
This approach is in response to the expected pullback, allowing traders to safeguard gains and position themselves advantageously for potential buying opportunities.
Looking ahead, the identified support levels on the charts are anticipated around 33810 and 33100. These levels represent potential areas where the index could find support, and as such, traders are encouraged to consider initiating fresh positions when the index is trading close to or within proximity of these support levels.
In summary, the current market dynamics for the Nifty IT Index signal a potential pullback amid overbought conditions. Traders are urged to exercise caution, strategically booking profits and patiently waiting for favorable entry points near the identified support levels.
This approach enables market participants to navigate the expected pullback and capitalize on opportunities in the ever-evolving market landscape.
Nifty Auto Index: Potential Sell Signal Amid Overbought Conditions
The Nifty Auto Index, currently trading at 17,932.70, is displaying signs of being in an overbought zone in the short term. Technical indicators such as MACD and RSI have both generated sell signals on the charts, indicating a potential shift in momentum.
Adding to this observation, the chart pattern suggests that the index is engaged in a narrow consolidation zone, ranging between 18,185 and 17,845. A decisive trade above or below this consolidation range could act as a trigger for the next directional move.
However, the prevailing indications suggest a higher likelihood of a downward trigger, given the negative bias in the technical indicators. If the index trades and closes below the lower boundary at 17,845, the subsequent support levels on the charts are anticipated at 17,275, 17,000 and 16,725.
To navigate these conditions, a prudent trading strategy involves booking profits and temporarily moving to cash. For risk-tolerant traders, initiating a short position at the current market price or on upward movements is a consideration, using a strict stoploss of 18,200 on a closing basis.
The targets for this short-selling strategy align with the identified support levels mentioned above. In summary, the Nifty Auto Index is exhibiting characteristics of a potential sell signal amidst overbought conditions.
Traders are advised to exercise caution, book profits, and, for those willing to take on additional risk, consider short-selling strategies in alignment with the identified support levels on the charts.
This approach allows traders to adapt to evolving market conditions and make informed decisions based on the signals presented by technical indicators and chart patterns.
Disclaimer: Ravi Nathani is an independent technical analyst. 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: Dec 20 2023 | 7:47 AM IST
