Ravi Nathani suggests profit booking in Nifty IT, wait and watch for Auto

The Nifty IT index has recently witnessed a sharp rally, while Nifty Auto is currently in a consolidation phase following a sharp correction

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Nifty IT index: Profit booking recommended amidst overbought conditions

The Nifty IT index has recently witnessed a sharp rally, pushing it into a consolidation phase, with the index now trading within a 700-point range. Immediate resistance levels are identified at 44,500, while key supports lie at 43,800, 43,400, and 43,000.

 

Technical indicators such as the Moving Average Convergence Divergence (MACD) and the Relative Strength Index (RSI) are showing signs of declining momentum, indicating profit booking and potential underperformance in the near term. The index appears to be overbought, and a correction is likely, especially with the monthly derivative expiry approaching this Thursday.

 

Traders and investors are advised to adopt a cautious stance and consider booking profits at current levels or on any further rise. Resistance in the range of 44,250 to 44,500 is expected to act as a near-term ceiling, signaling the possibility of a temporary top for the index.

 

Given the current technical setup, the best trading strategy would be to avoid building fresh long positions until the index stabilises post-correction. For those looking to re-enter, the support levels of 43,800, 43,400, and 43,000 provide potential accumulation zones once the correction phase is complete.

 

In conclusion, the Nifty IT index is poised for a short-term pullback after its recent rally. Market participants should focus on profit booking and await clearer signals of stabilisation before considering new long positions. A conservative approach will help navigate the index's expected correction phase effectively.

 

Nifty Auto index: Consolidation continues, awaiting a decisive breakout

The Nifty Auto index is currently in a consolidation phase following a sharp correction, trading within a defined range of 24,250 on the upper side and 22,650 on the lower side. For the past two weeks, the index has oscillated between these levels, reflecting a phase of indecision as market participants await a clear directional move.

 

This range-bound behavior highlights the importance of these levels as key support and resistance zones. A breakout above 24,250 could signal a renewed bullish trend, targeting higher levels as buying momentum resumes. Conversely, a breakdown below 22,650 may trigger further downside, with bears gaining control. Until one of these levels is decisively breached, the index is expected to remain confined within this range, creating opportunities for range-bound trading strategies.

 

For traders, this scenario presents two options: Risk-tolerant traders could buy near the lower boundary of 22,650 and sell near the resistance at 24,250, ensuring strict stop-loss levels are in place to manage downside risks. Meanwhile, conservative traders are advised to adopt a wait-and-watch approach, entering trades only after a confirmed breakout or breakdown.

 

This cautious strategy minimises the risk of false moves often observed during consolidation phases. The broader trend will become evident once the index decisively moves beyond the current range. Until then, short-term traders can exploit the range-bound movement, while long-term investors may need to wait for clarity on the direction. A breakout on either side will provide a significant trading signal, setting the stage for the next major move in the Nifty Auto index. (Ravi Nathani is an independent technical analyst. Views expressed are personal.)