Nifty could enter corrective phase; sell rallies with stop loss at 18,500

A stoploss of 18,500 will help limit potential losses in case the index moves against the anticipated correction

NIFTY 50 Index

The NIFTY 50 Index, currently trading at 18,203.40, is displaying signs of weakness based on various technical indicators. This suggests that a corrective phase may be imminent, If the index trades below the level of 17,800, it is likely to undergo a price-wise correction. In such a scenario, the next notable support levels are around 17,450, 17,175, and 17,005. These levels could see buying interest as they offer support to the declining index.

However, if the index remains below the level of 18,325, it indicates a time-wise corrctive phase with a negative bias. In this case, the index may continue to trade in a sideways manner for a certain period, without showing significant price movements. The support levels to monitor in this situation would be around 18,000 and 17,800.

Traders are advised to adopt a sell-on-rise approach, meaning they should consider selling the index when it experiences upward price movements. To manage risk, a stoploss of 18,500 on a closing basis is recommended. This will help limit potential losses in case the index moves against the anticipated correction.

On the other hand, investors are advised to exercise patience and wait for the correction to complete before initiating new positions. Once the correction phase concludes, investors may find opportunities to accumulate the index near the mentioned support levels. It is important to note that the short to mid-term trend remains bullish on the charts, indicating that the overall market sentiment is still positive despite the expected correction.

Nifty Bank Index

The Nifty Bank Index, currently trading at 43,969.40, requires close attention from traders when it approaches the 43,425 level. If the index closes below this level, it will trigger stoploss orders for all bullish positions. A closer look at the Relative Strength Index (RSI) reveals a pattern of lower tops, suggesting a consolidation phase at a value of 66. This indicates that the index is in an overbought zone, which could lead to a potential reversal in price.

Therefore, the recommended trading strategy for traders would be to sell the index on any upward price movements. To manage risk, it is advisable to set a strict stoploss at 44,225. On the charts, support levels can be observed around 43,425, followed by 42,050 and 40,725. These levels are likely to attract buying interest and may act as barriers to further downside movement.

It is important for traders to remain vigilant and monitor the price action around the critical 43,425 level. A close below this level would signify a potential shift in market sentiment and could result in increased selling pressure. By adhering to the mentioned trading strategy and keeping a close eye on support levels, traders can navigate the current market conditions effectively.

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Disclaimer: Ravi Nathani is an independent technical analyst. Views expressed are personal. 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.