Bank Nifty decisively closed below 50DMA and indicates that the wounds of the bulls have only deepened!

The daily range of Bank Nifty on Tuesday was about 900 points and it settled with a loss of 0.67%.

The index tested the 38.2% retracement level of the prior uptrend and decisively broke the 50DMA. It is now 0.96% below the 50DMA. After opening with a positive gap, it failed to sustain the initial gains and it declined sharply. The last 30 minutes of sharp recovery is because of short covering.

Bank Nifty is currently 4.51% below the 20DMA and 4.85% above the 200DMA. The Anchored VWAP support is at the level of 37328. The prior low support is at the level of 37950. The Elder impulse system has formed a third consecutive bearish bar. The MACD line declined further, and the histogram shows a strong bearish momentum. The RSI is now below 40 and indicating the index has entered into a bearish zone. As the index closed on the lower Bollinger band, it may experience a short covering bounce as the expiry is nearing. It is better to wait for a directional bias, at least for the first-hour candle to close. Then, accordingly one can take a position.

Strategy for the day

After oscillating around 900 points during the day, the Nifty witnessed a sharp bounce in the last 30 minutes amid short covering. Going ahead, a move above the level of 38520 is positive for the index and it can test the level of 38845 on the upside. Meanwhile, a strict stop loss is recommended for all the long positions and the stop loss level should be placed around the level of 38390. But, a move below the level of 38290 is negative, and it can test the level of 38070 on the downside. Maintain a stop loss at the level of 38990. Below the level of 38070, continue with a trailing stop loss.