Here's why the Nifty can rally to 18,200; Ravi Nathani explains

According to the technical analyst, the Nifty is in the process of forming an Inverse Head and Shoulder pattern, which is a bullish chart pattern.

Nifty

Outlook: Bullish

Last close: 17,944.20

The index has a positive near-term trend, indicating a bullish sentiment among investors. However, it is crucial to note that the index has strong support levels between 17,750-17,800.

A close below this range could trigger further correction on the charts, with the next support levels at 17,650 and 17,525. The best trading strategy for traders would be to buy the index on dips or at the current market price, with a target of 18,200 and 18,400.

This trading strategy is recommended as the index is currently forming an Inverse Head and Shoulder pattern, with the right shoulder currently in formation. The Inverse Head and Shoulder pattern is a bullish chart pattern that indicates a possible trend reversal.

In this pattern, the index forms three consecutive troughs with the middle trough being the lowest and the outer two troughs of equal height. The head and shoulders resemble the shape of an inverted head and shoulders, with the neckline acting as a crucial support level.

The price action indicates that the index is forming the right shoulder, and the pattern is expected to be completed once the index crosses the neckline. The neckline in this pattern is at the level of 18,080, which is slightly above the current market close. 

Hence, traders and swing players should consider buying the index on dips, with a strict stop loss of 17,800, which is expected to be the support and end of the current correction and right shoulder pattern on the Inverse Head and Shoulder chart.

In conclusion, traders should keep an eye on the support levels and adjust their trading strategy accordingly. They should also consider the formation of the Inverse Head and Shoulder pattern and the potential trend reversal it indicates.

While the index has a positive near-term trend, it is always prudent to keep an eye on the support levels and adjust the trading strategy accordingly to mitigate risks.

No Trade Zone: 17,836 – 18,036  

Expected Weekly Resistance: 18,200 – 18,400

Expected Weekly Support: 17,650 – 17,525

Bank Nifty Index

Outlook: Range Bound with a negative bias

Last close: 41,131.75

The Bank Nifty Index is currently trading at 41,131.75, with a weak trend compared to the Nifty on the charts, showing a continuous formation of lower tops and lower bottoms. The current trend is expected to remain bearish until the index trades and closes above 41,980, which would signal a change from bearish to bullish.

According to the price action concept, if the Bank Nifty breaks and closes below the level of 40,750 in the current week, it is likely to underperform, with the next support levels appearing at 39,975 and 38,850.

On the other hand, trading and closing above 41,980 would see resistance levels at 42,350 and 43,150. For traders and investors, the best trading strategy would be to buy only above 41,980 and short sell only below 40,750, covering around the support and resistance levels mentioned above.

It is important to keep an eye on the trend and support levels to adjust the trading strategy accordingly. Additionally, Bank Nifty's performance should be monitored closely in relation to the broader market, as it is an important indicator of the health of the financial markets.

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