Bank Nifty Breaks Key Support Levels Amidst Black Friday Bloodbath - Downside Momentum Building!

It was a Black Friday for Bank Nifty as it lost over 2% and for the week it lost 1.32%.

On the daily time frame index has formed a sizable bearish candle with a long upper shadow and what's striking is the fact the index for the first time managed to close below its 5EMA since March 31. Meanwhile, on the weekly time frame index has formed a dark cloud cover candle, as it erased most of the previous week's gains. It closed at a six-day low. As HDFC Bank declined by 5.91% has an adverse effect on the index. The index declined below the 5 and 8EMAs and closed near 20DMA. The index also tests the previous week's breakout level. The weekly RSI is back in the neutral zone. The MACD line is about to decline below the signal line. If the histogram turns negative, we may see a sharp downside. There is a negative divergence that emerged in a longer time frame. But, the hourly divergence in RSI has got confirmation and resulted in a sharp decline.

Both PSU bank and Private sector bank indices were in the weakening quadrant. Except for ICICI Bank and SBI, all other index components lost momentum and registered failed breakouts. The Elder impulse system has formed a strong bearish candle. Only a move above the level of 43100 will be positive now; on the downside, expect the 20DMA may act as support and immediate support for the index.

Strategy for the day 

The Bank Nifty closed sharply negative and tested the previous breakout level. A move above the level of 42755 is positive, and it can test the level of 43078. Maintain a stop loss at the level of 42650. But, a move below the level of 42650 is negative, and it can test the level of 42360. Maintain a stop loss at the level of 42755. Below the level of 42360, continue with a trailing stop loss.