Charts suggest positive breakout likely for Nifty IT index: Ravi Nathani

Nifty 50

Last close: 17,856.50

The Nifty 50 index, which currently trades around 17,856.5 levels exhibited a flat performance on a weekly basis, with a mere 2-point gain compared to the previous week.

In terms of technical analysis, the index has a strong support level at 17,475, and if it closes below this level, it would signal a negative breakout and result in underperformance in the short term.

Therefore, it is imperative for all long positions to maintain a stop loss on a closing basis below 17,475, as a violation of this level would lead to the index finding support directly at 16,600.

On the other hand, the index has a stiff resistance level at around 18,000, and if it closes above this level, it would indicate a positive breakout and the index would find its next resistance at 18,300. In this scenario, the most suitable trading strategy for all traders would be to buy on dips near the support levels with a strict stop loss on a closing basis of 17,475.

Nifty Bank

Last close: 41,559.40

As per charts, the Nifty Bank index is manifesting a pattern of sideways correction with a negative bias. This is evidenced by the channel it has formed with lower tops and lower bottoms on its weekly chart, with the range of 42,500 on the higher side and 39,600 on the lower end.

Until a violation of this range occurs, it can be anticipated that the index will continue to fluctuate within this boundary. This pattern is characterized by a tendency to bounce back to the higher side of the range when it reaches the lower side and to correct sharply when it reaches the upper end, with support found at the lower end once again.

In light of these observations, it is advised that traders adopt a strategy of being buyers when the market is at a lower level and book profits when it approaches the upper end, followed by initiating fresh shorts and vice versa.

Nifty IT

Last close: 30,870.20

As the index trades at 30,870.20, it is on the verge of a positive breakout as it hovers near the key level of 31,255.

A close above this level would signal a bullish trend, with traders having the potential to reap significant rewards in the form of a sharp rally in the index and its constituents.

The expected resistance levels for this rally are 32,800 and 34,350, providing traders with potential targets to aim for. It is recommended that traders adopt a bullish stance by buying the index above 31,255, while maintaining a strict stop loss of 29,800 to mitigate potential risks.

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