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Stock trading guide for today: How to approach pharma, FMCG counters?

Technical indicators such as the RSI, MACD, and Stochastic are showing signs of potential correction and underperformance for the Nifty Pharma index

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Ravi Nathani Mumbai

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Nifty Pharma Index

The Nifty Pharma Index has experienced a sharp rally, bringing it close to its stiff resistance level. Currently, the index is trading within a short-term range of 19,400 to 18,200. Given its proximity to the upper resistance boundary of this range, the best trading strategy for traders and investors would be to sell on rise or book profits at the current market price (CMP). 

Technical indicators such as the RSI, MACD, and Stochastic are showing signs of potential correction and underperformance. The RSI, which measures the speed and change of price movements, suggests that the index is overbought and could face downward pressure. 

The MACD, which shows the relationship between two moving averages of the index's price, indicates weakening momentum. Additionally, the Stochastic oscillator, which compares a particular closing price of the security to a range of its prices over a certain period, is also signalling a potential downturn. 

In summary, with the Nifty Pharma Index nearing its upper resistance level and technical indicators pointing to a possible correction, the prudent trading strategy would be to sell on rise or book profits at the CMP. This approach allows traders and investors to lock in gains before a potential pullback, aligning with the signals from key technical indicators.


Nifty FMCG Index

The Nifty FMCG Index is currently trading within a short-term range of 56,225 to 54,500. In the near term, the index has approached its resistance level, indicating that it might encounter selling pressure as it rises.

The stiff resistance range for this index is between 56,225 and 56,600, suggesting that the index might reach a near-term top within this zone. Consequently, the best trading strategy would be to sell on rise and book profits, especially considering the technical indicators. Both the stochastic oscillator and the Relative Strength Index (RSI) are indicating that the index is in an overbought zone. 

The stochastic oscillator, which compares a specific closing price to a range of its prices over a certain period, signals potential downward pressure when the market is overbought. Similarly, the RSI, which measures the speed and change of price movements, suggests that the index might be due for a correction as it nears its resistance level. 

Therefore, for near-term and swing traders, the optimal strategy would be to book profits on rise or at the current market price (CMP). This approach helps in capitalising on the gains before the index potentially faces selling pressure and a subsequent pullback. Given the current technical analysis and market conditions, selling on rise ensures that traders can secure profits in an overbought market environment.

(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.)

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First Published: May 24 2024 | 6:33 AM IST

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