Chartist Rohit Srivastava's Nifty trading strategy as it slips below 20-day average

The Nifty closing below its 20-day average on February 19 could be the first sign that the market may see more weakness in the near term, according to Rohit Srivastava, Founder of IndiaCharts and Strike Money, who spoke to CNBC-TV18.

“Yesterday, the Nifty is closed below the 20 day average. So that's the first sign of near term weakness. And we'd look at, if we stay below that, we go to test maybe 25,100 which is sort of filling the gap that we had made on the trade deal day,” he said.

On the upside, the Nifty's recent high of 26,020 as the key resistance level.

Srivastava said investors should now watch an even more important level on a monthly basis. “This is only a correction in a bull market; we would have to hold 24,718. If that breaks, then the monthly bands come into focus, and those are way lower. That's almost around 22,750 so are we going to make that plunge of 1000- 2000 points will depend a lot on how we close for the month.”

Bank Nifty has so far held up better, although momentum may be turning negative there as well. Srivastava said his momentum indicators have already given a bearish signal, even though the index remains above its own 20-day average of 60,086. However, if this breaks, the next support lies at 58,500.

Strategy for investors

Given rising global uncertainty and steady negative news flow, Srivastava said long-term investors may want to consider protecting their portfolios instead of exiting the market entirely.

“For all of that, the ideal way is that you buy a one year hedge and it's still cheap because the India VIX has not gone up substantially. It costs approximately 2% to hedge yourself for the rest of 2026 so we are talking about December 2026 puts for the strike of 25,000,” he said.

Hedging refers to buying financial protection against potential losses. In this case, investors can buy what are known as put options, which gain value if the market falls, helping offset losses in their stock portfolio.

Strategy for traders

For traders, however, the strategy may need to be more tactical in the current market phase.

Srivastava suggested focusing on sectors that have already been underperforming rather than attempting to short stronger pockets of the market.

He said that based on a comparison of one-year and one-month performance across stocks, the three weakest sectors in the market currently are information technology, real estate, and fast moving consumer goods.

“So the trade therefore, on the short side, the easiest shorts are essentially in the real estate and technology space because those are the weakest segments. And anytime the market falls, you see a lot of selling happening there,” he said.

Instead of trying to predict when stronger segments such as public sector banks may start correcting, he said traders may be better off targeting areas that have already been making lower lows over the past six to twelve months. "Target weakness in a weak market," he said

Whether the current fall turns out to be a routine correction or the start of something more serious may now depend on where the Nifty closes by the end of the month.