Nifty Auto, Energy indicate bearish trend on charts: key levels here

Nifty Auto Index

The Nifty Auto Index is currently exhibiting a weak near-term trend, as evidenced by a consistent pattern of lower tops and bottoms on the charts. This downtrend suggests that the index is struggling to find upward momentum. 

If the index trades and closes below the crucial support level of 23,635, it is likely to find its next support levels at 23,430 and 23,025. 

Given this technical setup, the best trading strategy for traders would be to sell on rises, particularly as the index approaches these resistance points. A strict stop-loss should be set at 23,975 to manage risk effectively.

Technical indicators such as the Moving Average Convergence Divergence (MACD) and the Relative Strength Index (RSI) are also supporting the bearish outlook. Both indicators are showing signs of weakness, reinforcing the expectation of continued underperformance. 

The MACD is likely signalling downward momentum, while the RSI could be indicating that the index is not in an oversold condition yet, leaving room for further declines. 

By adhering to the sell-on-rise strategy and the stop-loss level, traders can capitalise on the ongoing downward momentum while effectively managing their risk exposure.

Nifty Energy Index

Following a sharp correction observed on the hourly charts, the Nifty Energy Index is now expected to trade within a defined range of 40,800 to 40,400. Within this 400-point range, the index is likely to consolidate until a breakout occurs in either direction. 

The best trading strategy, in this case, would be to wait for a definitive breakout, as trading within the range might lead to whipsaws and unclear market signals.

If the index breaks out on the higher side, the next resistance levels on the charts would be at 41,200 and 41,700. Conversely, if the index moves lower, the support is anticipated around the 40,000 level. 

This strategy allows traders to avoid premature entries and instead position themselves based on clear breakout signals, thereby enhancing the probability of successful trades. Waiting for the breakout ensures that traders are aligning with the prevailing market momentum, whether bullish or bearish.

In summary, while the Nifty Auto Index suggests a sell-on-rise strategy due to its bearish indicators, the Nifty Energy Index warrants a wait-and-watch approach until a clear breakout direction is established. This nuanced approach ensures that traders can adapt to market conditions, effectively manage risks, and capitalise on potential opportunities.

(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.)