Ravi Nathani recommends buy-on-dips strategy for Nifty50, Bank indices

Nifty 50 Index: Doji signals end of correction and new wave formation

 

The Nifty 50 Index closed with an absolute doji on the weekly charts, signaling a potential end to the ongoing corrective phase. This pattern suggests the likelihood of a new wave emerging on the short- and mid-term charts, accompanied by an expected bounce from oversold levels. Key resistance levels for the short term are identified at 23,800, 24,275, and 24,675, where traders should monitor for profit-taking or potential reversals. On the downside, the lowest level of the previous week at 23,047 serves as a crucial stop-loss level, which should be adhered to on a weekly closing basis to manage risk effectively. Technical indicators such as Stochastic and RSI are currently in oversold zones, reinforcing the probability of a rebound in the near term. This makes buying on dips and accumulating positions the most suitable trading strategy. Traders should focus on taking advantage of any short-term corrections to enter positions at favourable levels. 

 

In conclusion, the Nifty 50 Index is poised for a recovery, as indicated by the doji pattern and oversold technical indicators. A disciplined buy-on-dips approach with strict adherence to the stop-loss level at 23,047 can help traders capitalise on the anticipated bounce, with resistance levels serving as target zones for profit realisation.

 

Nifty Bank Index: Oversold conditions favour accumulation on dips

 

The Nifty Bank Index is likely to experience a small consolidation phase in the near term, with the anticipated trading range set between 49,575 and 47,875. A breakout or breakdown from this range on a trade and close basis will determine the next directional move. Currently, the technical indicators on the weekly charts, particularly Stochastic, indicate oversold conditions, suggesting a technical bounce is on the horizon. Resistance levels on the charts are identified at 49,575, 50,175, and 50,900, making these zones potential profit-taking or reversal points during any upward movement. The best trading strategy in this scenario is to accumulate the index on dips, particularly near the lower end of the consolidation range, as this provides a favorable risk-reward setup. A strict stop-loss should be placed at a weekly close below 47,875 to manage downside risks effectively. 

 

In conclusion, the Nifty Bank Index presents a strategic opportunity for accumulation during dips within the consolidation range. Traders should focus on building positions near support levels while targeting resistance zones for profits. Adhering to the defined stop-loss level ensures disciplined risk management during this anticipated technical bounce.

 

(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.)