Would Bank Nifty rescue the markets from interest rate hike jolt from US Fed?
On Wednesday, the Bank Nifty ended the day with a loss of 0.64%. It has formed a long-legged doji or a high wave like candle on the daily chart with a lower high and lower low. The 5EMA acted as a support on Wednesday, though it was breached on an intraday basis, but it managed to hold it on closing basis.
As the US Federal Reserve has hiked interest rate by 75 basis points, the Banking and Financial sector stocks are expected to trade nervously. However, in the past these stocks have rescued market from a disaster as well, hence, we should closely watch, how these stocks react and whether dips would be used to buy these stock.
The RSI has declined further to 65 and formed a negative divergence. The MACD line is about to give a sell signal. On an hourly chart, the index closed within the moving average ribbon, and the MACD line is above the zero line, showing a neutral stance. The 40889 - 41677 zone will be crucial support and resistance for the index in the coming days. Either side breakout will give a directional move. The volume suggests distribution took place on Wednesday. There was a long unwinding as the price and open interest declined. All the index components closed negatively. Apart from the central banks meeting, Weekly expiry will increase the volatility. Better avoid the leveraged positions unless we get clarity on direction.
The Strategy for the day
The Bank Nifty closed in a neutral zone. A move above the level of 41255 is positive, and it can test the level of 41426. Maintain a stop loss at the level of 41190. Above the level of 41426, continue with a trailing stop loss. But a move below the level of 41055 is negative, and it can test the level of 40813. Maintain a stop loss at the level of 41190. Below the level of 40813, continue with a trailing stop loss.
DisclaimerInvestment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial.
In the week gone by, Nifty traded with higher volatility as the index corrected during mid-week upto 21860, but it then witnessed a smart recovery to register new record high and the index ended the week just below 22400 with weekly gains of three-fourth of a percent.
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