Should investors book profits in Nifty IT, Auto? Check key levels here

Nifty IT index analysis

The Nifty IT Index is poised for a correction in the near term, as technical indicators signal an overbought condition. This setup implies that a pullback or a minor correction is likely in the coming days. Key support levels on the charts are identified at 36,800, 36,425, and 35,450, which could act as potential targets during this corrective phase.

Given this outlook, the optimal trading strategy would be to sell on the rise, setting a strict stop-loss at 38,300. This approach allows traders to take advantage of the anticipated pullback while effectively managing their risk. 

The recommendation to sell on upward movements is supported by the overbought status indicated by technical indicators, suggesting limited room for further immediate gains. By selling on rises, traders can align their positions with the expected market correction, thereby optimising their trading outcomes in the current market scenario.

Nifty Auto index analysis

The Nifty Auto Index currently exhibits a bullish trend on the charts, yet traders and investors should approach with caution. Despite the positive pattern, the risk-to-reward ratio is not favourable due to negative divergences in technical indicators. Therefore, the optimal strategy would be to book profits on rises or near the resistance levels. 

These resistance levels are identified at 26,275 and 26,700. It is crucial to monitor these levels closely as the overall trend is poised to shift from positive to negative if the index closes below 25,000. This level acts as a vital stop-loss for all bullish positions for near and short-term traders and investors.

Support levels are expected at 24,110 and 23,000, providing potential entry points for those looking to capitalise on pullbacks. The current market conditions suggest that while the index shows strength, the underlying technical indicators advise caution. Therefore, selling on rises or near resistance levels would mitigate potential downside risks. 

The 25,000 level serves as a critical threshold, marking the stop-loss for maintaining bullish positions. In summary, profit booking on upward movements is advisable, with a strategic focus on key resistance and support levels to navigate the current market dynamics effectively.

(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.)