Bank Nifty bulls will aim to take over the positive baton from Tuesday’s session!

Bank Nifty on Tuesday opened with a gap-up and it went from strength to strength to close near the day’s high. It closed above the 39,100 mark with gains of 2.84%

On the daily chart, the formed a bullish candle with a higher high and higher low as compared to its prior bar and it managed to close above the 50DMA with a higher volume. It also closed above the last Friday's high. However, it is yet to fill the gap which was created on September 26.

Interestingly, the index registered over a thousand-point rally twice in the last three days. It is still 1.84% below the 20DMA, but just closed above the 50DMA. The gap area of the 39229-412 is likely to act as immediate resistance. Above this zone, another crucial resistance is placed at the level of 39586, and the 20DMA is at placed at 39841. If these levels are cleared on the way up, Bank Nifty can test the level of 40138. On the other hand, on the downside, the level of 37386 is a crucial support to watch out and sustaining below this level will result into the resumption of the downtrend and it will test below 36000 levels.

The Tuesday rally is mostly because of the short covering. As weekly derivative expiry is in place, volatility will play a major role on Thursday. The RSI is above its 9-period average, while the histogram shows an improvement in the positive momentum. The elder impulse system has formed a bullish signal. It is better to wait for an hourly bar to close for a directional trade.

Strategy for the day

Bank Nifty closed strongly above the 50DMA with a bullish candle. A move above the level of 39113 is positive, and it can test 39550. Maintain a stop loss at the level of 39000. Above the level of 39550, continue with a trailing stop loss. But, a move below the level of 39000 is negative, and it can test 38700 on the downside. Maintain a stop loss at the level of 39113.