Bank Nifty running out of steam!

Bank Nifty broke out of a 10-day tight-range base with a strong bullish candle.

On Friday it opened higher and registered a fresh all-time high. However, it failed to sustain at higher levels as profit booking emerged ahead of the weekend and the index closed a little over 200 points from the day’s high, despite trimming its gains from the day’s high it ended the day with modest gains of 0.08%. On the daily chart, the formation resembles a hanging man candle. On the weekly basis, it jumped over 1% and formed a bullish candle.

Bank Nifty has closed just on the channel support line on the daily chart. Currently, it is trading 1.72%above the 20DMA and 5.95% above the 50DMA. But there are some caution signs at the lifetime high. Apart from the hanging man candle, all the major indicators show fatigue in the index. The RSI is flat for the last two months, the MACD line and Signal line are moving together, and the histogram shows a lack of bullish momentum. KST and the TSI indicators have been in the bearish set-up. As the index is at the lifetime high, there are no weaker signals, but there are exhaustion signs. The PSU banks look very strong and leading the index rally. For now, if the index trades above the level of 43640, be with a positive bias, and it can test the level of 44200. But, in any case, if it declines below Friday’s session low of 43300, it will consolidate further in a counter-trend.

Strategy for the day

Bank Nifty strongly recovered in the last hour. A move above the level of 43640 is positive, and it can test the level of 43800. Maintain a stop loss at the level of 43580. But, a move below the level of 43520 is negative, and it can test 43300. Maintain a stop loss at the level of 43607. Below the level of 43300, continue the short position with a trailing stop loss for lower targets.