Bank Nifty to face tremor of bears rage!

Bank Nifty has rallied 8582 points or 26.58% from June lows. It outperformed by benchmark index, the Nifty.

On a weekly closing basis, the prior lifetime high was 40323 and interestingly, for the past three days, it has managed to sustain above this level. Though daily trading ranges are getting narrow, the index is forming is maintaining its rhythm of higher high candles. The daily RSI has moved above the 70 zone. The MACD histogram shows an increased bullish momentum. The index formed a higher high, but these key indicators have not formed a high. That said, the price action on the hourly chart, has not closed below the prior bar low, which shows strength. The rising ADX shows a solid trend strength. However, the only concern on the hourly chart, is that the MACD and RSI have shown negative divergence. This needs confirmation by closing at least below the prior day's low. For a bearish view, the index has to close below the level of 40390. Until and unless it closes below this level be with the trend. As long as it moves higher, there is no scope for short positions.

Strategy for the day

Bank Nifty maintained its rhythm of higher high and it closed near the day high. It opened with a gap up closed near day's high. This strong close may not be helpful on Wednesday as overnight cues from Wall Street are terrifying and Banknifty might open with a gap down. Wait for at least a first-hour candle to take any trading decision. A move above the level of 40878 is positive, and it can test the level of 41155. Maintain a stop loss at the level of 40750. Above the level of 41155, continue with a trailing stop loss. But, a move below the level of 40720 is negative, and it can test the level of 40540 followed by 40390. Maintain a stop loss at the levels of 40830 for a short position.