Charts signal Nifty Auto index to bounce back in near-term: Ravi Nathani

According to the technical analyst, charts suggest rapid technical bounce for the Nifty Auto index, wherein traders can anticipate a price recovery

Nifty PSU Bank
Last close: 3,675.45
 

Charts indicate that the index is exhibiting signs of weakness in the near term. This weakness is evidenced by a potential for fresh round of selling if the index fell below the critical threshold of 3,580. In such an event, the subsequent levels of support are expected to be around 3,465 and 3,300.

Bullish traders, who seek to benefit from an upward price movement, are advised to proceed with caution. It is recommended that these traders wait until correction is complete before entering a long position. This strategy is rooted in the belief that the correction process may lead to a better entry point for the trade, resulting in a more favorable risk-reward ratio.

However, for those traders who are willing to take on additional risk, there are alternative strategies that can be employed. One such strategy involves buying on dips, provided that a strict stop loss of 3,580 is adhered to with a target of 3,890 and the second strategy for risky traders would be short selling at a rise with a stop loss of 3,760, and the target is expected at 3,465 and 3,300.

Nifty Auto
Last close: 12,345.60
 

The index displayed a rare and distinctive close at a value of 12,345.60. This achievement is noteworthy, particularly as it follows a sharp correction.

In light of these events, it is advisable for traders to cover all short positions. This is because the index has reached its lower targets and closed near the support zone. These indications suggest that a rapid technical bounce is expected and that traders can anticipate a price recovery.

The recommended trading strategy for traders who wish to take an advantage of these trends involves buying the index and its constituents. This strategy can be executed at the current market price or at a lower price point during dips.

The target price range for this trade is anticipated to be between 12,780 and 13,060. However, it is crucial for traders to implement strict stop-loss protocols to minimise risks associated with this approach. A recommended stop-loss point for this strategy is below 12,260.

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