Correction in sight for Nifty50, MidCap Select index; here's how to trade

Nifty 50 Index Analysis

On the weekly charts, the Nifty 50 Index has closed down, relinquishing all recent gains, indicating substantial selling pressure at higher levels. This development is poised to impact trades in the upcoming week, particularly with two significant events on the horizon: the Union Budget announcement and the monthly derivative expiry.

These events are likely to curb fresh buying interest and increase pressure from profit booking on long positions. Such a scenario could lead to lower index levels and underperformance in the near term. The support levels on the charts are identified at 24,400, 24,150, and 23,840.

Given these conditions, the best trading strategy would be to wait for the index to complete its correction, which is likely a pullback within a broader bullish trend. Investors should consider buying near these support levels to capitalize on the anticipated rebound.

It is important to note that if the index closes below 23,500, the next strong support levels on the mid and long-term charts would be at 23,050, 22,650, and 22,050. These levels represent the best accumulation points for investors, providing a favorable risk-reward ratio for long-term positions. Monitoring these levels closely will be crucial for making informed investment decisions.

Nifty Midcap Select Index Analysis

The near-term trend for the Nifty Midcap Select Index is down, with support levels on the charts expected at 11,980 and 11,500. Traders and investors should look to accumulate the index and its constituents if it trades within these support levels, as the overall trend remains bullish.The current correction should be viewed as a pullback within a larger uptrend, providing opportunities for strategic buying.

The best trading strategy for traders would be to wait for the correction to conclude and then seek opportunities to buy the index around the identified support levels.

This approach allows for entering positions at more favorable prices, maximizing potential gains while minimizing risks. Given the overall bullish trend, accumulating positions during this pullback phase can position traders and investors for significant upside as the index resumes its upward trajectory.

(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.)