Bank Nifty in pullback mode; breakout above 44,000 can trigger fresh rally

According to Ravi Nathani, an independent technical analyst, technical indicators on the Nifty 50 chart too are showing a positive trend, hence on can consider to buy Nifty on dips.

NIFTY 50

The current market price for NIFTY 50 stands at 19,230.60. In the near term, the index has displayed a notable bounce from the 200-day Exponential Moving Average (DEMA), indicating a bullish sentiment. However, challenges lie ahead, particularly in the form of resistance levels. 

According to the near-term Exponential Moving Averages (EMA), stiff resistance is anticipated between 19,350 and 19,450. This range aligns with the cluster of EMAs spanning 10, 25, 50, and 60 days, which converges around 19,450. Hence, 19,450 becomes a crucial level to monitor closely. A close above this level could pave the way for further upward movements, targeting 19,700 and 19,900 in the near term. 

Technical indicators, including the Relative Strength Index (RSI), are showing a positive trend, supporting the bullish sentiment. Additionally, smaller time-frame EMAs are trending upwards, reinforcing the optimistic outlook. Considering these factors, the recommended trading strategy for traders this week is to buy on dips or near the suggested support levels placed at 19,175 and 19,025. Implementing a strict stop loss at 18,900 is advised, ensuring risk management in case of unexpected market fluctuations. By aligning their trades with these levels and technical indicators, traders can strategically position themselves to capitalize on potential market movements.

Nifty Bank Index

The current market price for the Nifty Bank Index is 43,318.25. The trend in the near term is decidedly bullish and is expected to be stronger than Nifty, primarily due to the recent pause in the index's correction at a robust support level, followed by a bounce. This correction is viewed as a pullback within the broader bullish trend, offering excellent buying opportunities for investors and traders alike.

It's crucial to recognize that the short-term outlook remains bullish on the charts. The recent correction served as a pullback, creating advantageous entry points for those looking to invest or buy into the index and its constituents.

Traders are advised to keep a keen eye on the 44,000 level. A close above this mark might initiate a significant rally in the near term, potentially leading to new all-time highs once more. Various technical indicators, including RSI, Stochastic, EMA's, and SMA's, are aligning favorably with this bullish trend. 

To manage risks effectively, traders and investors are encouraged to implement a strict stop loss at 42,100. Consequently, the optimal trading strategy for market participants would be to buy on dips or at the current market price (CMP). This approach leverages the current market dynamics, allowing individuals to capitalize on the ongoing bullish trend while mitigating potential losses through strategic risk management.

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