Bank Nifty signals weakening of momentum

On Thursday, the Bank Nifty opened with a gap up and it filled the gap of September 26. 

In the initial part of the trading session, the index moved higher and registered an intraday high of 39608, however, it slipped over 300 points from the day's high and it closed near the day's low. 

On the daily chart, Bank Nifty has formed a shooting star candle. After a 2222 points rally, this candle signals a weakening of momentum. The index faced strong resistance at the 50% retracement level of the last four-day rally. It sustained above the 50DMA and also filled the September 26 gap. The index is still below the 20DMA and the moving average is in a downward trajectory. 

As it closed below the opening level, causing some doubt about the continuation of the trend. After taking support at Anchored VWAP, the index has formed two consecutive bullish candles. For weekly closing, the 39177-235 zone will act as important support. In any case, a close below this zone on an hourly basis will be negative. Thursday's high of 39608 and the 20 DMA level of 39832 will be crucial resistance on the upside. In a nutshell, the zone of 39045-39832 zone is going to act as a range and a break on either side of the range would result in a trending move on the Bank Nifty. 

Strategy for the day  

Bank Nifty has formed a bearish candle and closed at the day's low. Also, it is trading below its 20DMA, hence, traders should be cautious. Only a move above the level of 39421 is positive, and it can test the level of 39570. Maintain a stop loss at the level of 39300. Above the level of 39570, continue with a trailing stop loss. But, a move below the level of 39278 is negative, and it can test the level of 39045. Maintain a stop loss at the level of 39421. Below the level of 39045, continue with a trailing stop loss.