Nifty Fin Services signals underperformance on charts: Here's how to trade

Nifty Financial Services

The Nifty Financial Services Index, currently positioned at 21,604.50, has recently undergone a sharp rally, bringing it into close proximity to its resistance level of 21,700. In light of this development, traders are advised to exercise caution and consider initiating selling positions on any further upward movement in the index. 

A strict stop-loss strategy is recommended, with options including placing a stop-loss order at either 21,700 or the safer level of 21,850. This precautionary measure is crucial given the anticipation of the index's underperformance in the near term. Support levels on the charts are projected to be around 21,400 and 21,275. 

These levels may serve as potential areas where the downward momentum could be mitigated, providing traders with opportunities to manage their positions accordingly. 

Technical indicators, particularly the Moving Average Convergence Divergence (MACD) on hourly charts, suggest a pattern of underperformance in the near term. Therefore, it is prudent for traders to either book profits at the current market price or consider initiating fresh short-selling positions on any rise in the index. 

By adhering to these recommendations, traders can navigate the current market conditions effectively and capitalise on potential profit opportunities while managing associated risks. It is essential to remain vigilant and responsive to changes in market dynamics, adjusting trading strategies accordingly to optimise outcomes.

Nifty PSU Banks Index

The Nifty PSU Banks Index concluded its trading session at 7,241.25, hovering closely around its support level of 7,210. In the near term, the index appears to be trading within a range-bound pattern, characterised by a range between 7,400 and 7,210. 

A decisive move above or below this range could signify a directional shift for traders to consider. Should the index breach the lower bound at 7,210, it may indicate a bearish sentiment, potentially leading to further downside movements. 

In such a scenario, the next support levels on the charts are anticipated to be at 7,125 and 6,960. Conversely, if the index manages to break above the upper bound of the range, resistance levels are projected to be at 7,500 and 7,650. 

Given the current market dynamics, the recommended trading strategy is to exercise patience and await a clear breakout before initiating any new positions. 

By waiting for a decisive move above or below the established range, traders can avoid premature entries and position themselves to capitalise on the subsequent momentum in the identified direction. 

Adopting a cautious approach and aligning trading decisions with confirmed breakout signals can help traders navigate the market with greater precision and effectiveness. 

It is essential to remain vigilant and responsive to emerging price action, adjusting trading strategies accordingly to optimise trading outcomes.
 

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Disclaimer: Ravi Nathani is an independent technical analyst and 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.