Nifty IT shows bearish trend, Nifty Auto overbought; trading strategy here

Nifty IT Index: Bearish Trend with Selling Pressure

The Nifty IT Index is currently exhibiting a bearish trend in the near term. A close below 41,600 would trigger additional selling pressure, pushing the index towards its key support levels at 40,750, 38,925, and 37,500. Given this outlook, the best trading strategy would be to adopt a "sell on rise" approach. Traders should look for opportunities to short the index during any upward moves, while maintaining a strict stop-loss at 43,590 on a closing basis to minimise risk. This bearish sentiment is expected to dominate unless a significant technical reversal occurs, but the current chart setup suggests that selling pressure will continue, especially if 41,600 is breached.

Nifty Auto Index: Overbought and Poised for a Dip

The Nifty Auto Index appears overbought on the near-term charts, indicating a potential pullback in the coming sessions, likely after the monthly expiry. This overbought condition increases the chances of selling pressure, with support expected at 26,500, 26,100, and 25,786 on the charts. The recommended strategy for traders is to sell into rallies and book profits, taking advantage of the expected correction. Given the current market conditions, selling on the rise allows traders to capitalise on the overbought nature of the index. However, it is essential to monitor key support levels for any potential buying opportunities once the index corrects to more favourable levels.

Conclusion

Both the Nifty IT and Nifty Auto indices are showing signs of weakness, with the Nifty IT Index trending bearish and the Nifty Auto Index overbought and poised for a dip. In both cases, a sell-on-rise strategy is recommended. For the Nifty IT Index, watch for a break below 41,600 to initiate short positions, while for the Nifty Auto Index, traders should look to sell into rallies, especially post-expiry. Traders should ensure they use appropriate stop-loss levels to manage risk, with 43,590 being critical for Nifty IT and close monitoring of support levels for Nifty Auto.

(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.)