Nifty Bank in overbought zone; Pvt Bank on the cusp of breakout; details

Nifty Bank Index: Overbought and Poised for Profit Booking

The Nifty Bank Index has entered the overbought zone according to technical indicators, signalling a potential near-term correction. 

Traders may witness profit booking on any further rise, and it's essential to closely watch the key level of 53,800. If the index trades below this level, a sharp correction could unfold, with immediate support levels at 53,500, 53,350, and 52,800. 

Given the current overbought condition, the best trading strategy would be to book profits at the current market price (CMP) and stay in cash for a few days. Waiting for a pullback will offer better opportunities to accumulate fresh long positions. Patience is key, as the index may correct to more favourable levels for re-entry. Traders should avoid chasing the market and instead wait for a correction to capitalise on fresh positions at support zones.

Nifty Private Bank Index: Awaiting a Breakout with Bearish Indicators

After a strong rally, the Nifty Private Bank Index has been consolidating in a narrow range for the past three days, with resistance at 27,150 and support at 27,000. A close above or below these levels will act as a trigger for the next directional move. 

Given the current market structure and overbought technical indicators, a pullback seems imminent. While the long-term trend remains bullish, overbought conditions suggest a cooling-off period, which may provide better opportunities to enter fresh long positions. The best strategy for traders would be to wait for a breakout before committing to any near-term trades. If the index breaks below the 27,000 level, it could trigger a pullback toward support levels at 26,750, 26,450, 26,200, and 25,980. 

These levels would provide good opportunities for accumulating fresh long positions. Although a short sell may seem tempting due to overbought signals, it is not recommended given the bullish outlook on long-term charts. For now, the preferred strategy is to book profits, stay in cash, and wait for the index to pull back to more reasonable levels before entering new long positions.

Conclusion

Both the Nifty Bank and Nifty Private Banks indices are showing signs of overbought conditions, signalling a potential pullback in the near term. In the Nifty Bank Index, traders should book profits and wait for a correction below 53,800 to accumulate new positions. Similarly, for the Nifty Private Banks Index, a pullback to key support levels offers a better opportunity for long entries. In both cases, short selling is not advisable due to the overall bullish trend in the long term, and it is prudent to wait for pullbacks to re-enter the market.

(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.)