Nifty PSU Bank bearish, Fin Svcs rangebound on charts; here's how to trade

Nifty Financial Services Index Analysis

Following a period of sharp volatility, the Nifty Financial Services Index is now anticipated to trade within a defined range. In the near term, the index is expected to oscillate between 22,400 and 22,100. 

A trade above or below this range would likely trigger movement in the respective direction, indicating a potential breakout or breakdown.

Given this range-bound pattern, the best trading strategy would be to wait for a clear breakout beyond the 22,400 resistance level or a breakdown below the 22,100 support level. For more risk-tolerant traders, an alternative strategy could be to sell on rises within the current range, employing a strict stop-loss for positions that close above 22,400.

This approach allows traders to capitalise on the potential volatility within the defined range while maintaining a disciplined risk management strategy. The use of a stop-loss above 22,400 ensures that any upward breakout is swiftly addressed, limiting potential losses. 

Until a clear breakout or breakdown is observed, maintaining positions within this range can help traders take advantage of the anticipated price movements without overcommitting in an uncertain environment.

Nifty PSU Banks Index Analysis

The Nifty PSU Banks Index is currently showing signs of potential underperformance, making a bearish trading strategy favourable in the near term. 

The index is close to a critical resistance level, and the best approach would be to sell either at the current market price (CMP) or on any upward movements. It is essential to implement a strict stop-loss at 7450 on a closing basis to manage risk effectively.

The anticipated support levels for this bearish trading strategy are 7060, 6950, and 6825. These targets are based on technical analysis, with the Relative Strength Index (RSI) indicating a downward trend and potential for further decline. This bearish outlook suggests that the index and its constituents could experience underperformance in the near term.

Given this scenario, traders should consider shorting the index or booking profits on existing positions. The strategy aims to capitalise on the expected dip while safeguarding against potential rebounds by adhering to the stop-loss level. 

By monitoring these support levels and the RSI's performance, traders can make informed decisions and optimise their trading outcomes within the current market conditions.

(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.)