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Nifty at 18,500; Charts hint breakout on cards?

Meanwhile, charts suggest that the Bank Nifty is sustains above 44,140 can rally to 45,000 - 45,300 levels says Ravi Nathani, an independent technical analyst.

stock markets, Nifty50
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Ravi Nathani Mumbai

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Nifty 50 Index

The current market price (CMP) of the Nifty 50 Index stands at 18,499.35. In a previous article, it was recommended for bearish traders to maintain a stop loss at 18,500 on a closing basis.

Interestingly, the Index has closed at the same level, just 1 point below. This indicates a potential breakout on the charts. However, it is advisable to wait for one more confirmation, specifically if the index closes above 18,500.

If the index indeed closes above 18,500, traders should expect the next resistance levels to be around 18,650 to 18,900 in the near term. This suggests that the market may experience some upward movement in the coming period.

For traders seeking the best trading strategy, there are two options to consider. Risky traders could choose to buy at the current market price (CMP), taking advantage of the potential breakout.

On the other hand, swing traders may opt to wait and buy on price dips around the support levels, which are identified as 18,000 to 17,800. This approach allows swing traders to enter the market at potentially more favorable prices.

In summary, the Nifty 50 Index has shown signs of a breakout as it closed just below the stop-loss level of 18,500. Confirmation of the breakout would require another close above 18,500. In such a scenario, traders can anticipate resistance levels around 18,650 to 18,900. Risky traders can consider buying at the current market price, while swing traders may prefer to buy on dips around the support levels of 18,000 to 17,800.

Nifty Bank Index 

The current market price (CMP) of the Nifty Bank Index stands at 44,018.00. The index is currently experiencing a state of absolute range-bound consolidation, suggesting a period of small-scale correction at higher levels. It appears that the index is in a timewise correction mode, indicating a potential breakout either to the upside or downside, depending on the demand-supply ratios.

However, when analyzing the technical indicators on the charts, indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are sloping downward. This implies that the technical indicators do not support a bullish breakout, adding to the confusion regarding the index's future direction.

In such a scenario, where indicators provide a negative bias while price levels exhibit a bullish bias, traders are advised to wait for a day or two to observe the outcome within the next 48 hours. There are two possible outcomes to consider.

Firstly, a breakout above 44,151 could lead to a sharp rally towards 45,000 to 45,300. Alternatively, a breakout above 44,151 could be followed by a violation and subsequent close below 43,400 in less than two days. This suggests a contradictory market situation, making it essential to carefully consider trading strategies.

For risky traders, an immediate buy above 44,151 with profit-taking around 45,000 could be an option. On the other hand, swing traders may wait for opportunities to short-sell when the index reaches levels around 45,000 to 45,300. It is worth noting that technical indicators are in the overbought zone, and they do not support bullish trades, which may pose risks in terms of the reward-to-risk ratio.

Alternatively, another strategy would be to go short below 43,400, with targets set at 42,000, 41,400, and 40,725. In simple terms, the best trading strategy for bullish traders would be to buy only if the index closes above 44,151, with a stop loss at 43,400 and targets at 45,000 to 45,300. In case the index closes below 43,400, a short-selling strategy should be adopted, with targets set at 42,000, 41,400, and 40,725.

(Ravi Nathani is an independent technical analyst. Views expressed are personal).

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First Published: May 29 2023 | 7:19 AM IST

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