Nifty Financial Services may see correction; PSB index eyes profit booking

The Nifty Financial Services index (current market price: 20342.05) has recently shown signs of near-term range-bound movement on charts. Investors are closely monitoring the index’s behavior within the range of 20415 to 20180, as a trade above or below this range could trigger significant directional movements.

The primary support levels to watch are set at 20180, 20060, and 19980. A close below 20180 would signal a potential downward trend, with the first support range likely to be established between 20060 and 19980. Any further close below this range would lead the index into the oversold zone, with the final support for the current correction anticipated at 19425.

Within the range of 19700 to 19425, investors are advised to accumulate the index and its constituents, considering the prevailing bullish trend on charts. However, the best trading strategy at this juncture would be to await the end of the near-term correction and seize the opportunity to buy the index near the aforementioned support levels.

On the other hand, should the index breach the resistance level of 20410 and close above it, the next resistance range is projected to be between 20500 and 20615. A further break beyond this range, leading to new highs, may attract sell pressure at around 20780 – 20950. This potential sell pressure could be supported by multiple indicators displaying negative divergence on charts.

As such, investors are advised to exercise caution and adopt a wait-and-see approach for a breakout confirmation. If the market corrects, they may consider buying near the identified support levels mentioned earlier. Conversely, in case of a rally, selling near the mentioned resistance levels is recommended.

The Nifty PSU Bank Index (current market price: 4620.55) has been exhibiting a flat closing trend over the last three trading sessions, raising concerns of an impending exhaustion phase in the near term. Traders are advised to exercise caution as this pattern could potentially lead to profit booking on any upward movements.

Over the past seven days, the index has struggled to breach the critical level of 4650, indicating a strong resistance zone. To mitigate potential risks, it is recommended to implement a strict stop loss at 4650 and consider selling the PSU Bank Index on any upward price movement.

The anticipated target for this selling strategy is set at 4525 and 4450, which may be reached if the index experiences a correction. By adhering to the stop loss and target levels, traders can better manage their risk exposure and optimize potential gains.

Disclaimer: Ravi Nathani is an independent technical analyst. Views expressed are personal. He doesn’t hold any positions in the indices mentioned above and this is not an offer or solicitation for the purchase or sale of any security.