Nifty Pharma Index: Range-Bound Movement
The Nifty Pharma Index is currently trading in a defined range between 23,700 and 22,700. This suggests that the market is experiencing indecision, with neither buyers nor sellers dominating.
The current range provides a predictable pattern for traders, where the optimal strategy would be to buy near the support level of 22,700 and sell near the resistance of 23,700. However, a breakout from this range would bring fresh trading opportunities and directional clarity. If the index closes above 23,700, it would indicate a bullish breakout, leading to the next resistance level at 24,200.
This would likely spark further buying interest, pushing the index higher. On the flip side, if the index closes below 22,700, it would confirm a bearish trend, opening the way for a decline towards the next support levels of 22,250 and 21,800. Until such a breakout occurs, traders may prefer to continue trading within the range.
For risk-averse traders, waiting for a confirmed breakout is a safer strategy. A close above 23,700 would be a signal to go long, while a close below 22,700 would warrant short positions. In both cases, stop-losses should be strategically placed to limit potential losses.
Nifty FMCG Index: Overbought Signals Indicate a Pullback
For this reason, a sell-on-rise strategy is recommended, where traders can look to sell near the resistance level of 65,625, with a strict stop-loss placed at this level on a closing basis. If the index closes above 65,625, it would signal a bullish breakout with an upside target of 66,200.
However, given the overbought condition, this scenario seems less likely. Should the index close below 64,264, a bearish breakout would be confirmed, targeting lower supports at 63,800 and 63,000. For range traders, buying near support and selling near resistance is also viable, but caution is advised due to the overbought nature of the index.
Conclusion
Both the Nifty Pharma and Nifty FMCG indices are range-bound, presenting opportunities for range-bound trading strategies. While the Pharma index offers a balanced trading range with defined breakouts, the FMCG index shows overbought conditions, making a sell-on-rise strategy more favorable. Conservative traders should wait for clear breakouts in either direction before committing to trades, ensuring proper risk management through the use of stop-losses.
(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.)
First Published: Sep 20 2024 | 6:21 AM IST
