Bank Nifty index is inside the leading quadrant; can it continue to display its relative outperformance, find out here!

Bank Nifty index is inside the leading quadrant; can it continue to display its relative outperformance, find out here!

by 5paisa Research Team Last Updated: 2022-07-11T10:33:20+05:30

In the last week, the Banknifty outperformed the Nifty by a wide margin as Banknifty jumped nearly 4.75% against gains of nearly 3% registered by Nifty.

Bank Nifty has formed a strong sizable bullish candle on the weekly chart. It is now trading above its 20 and 50DMA, however, on Friday it halted its upmove right at the 100DMA and formed a bearish candle as it closed below the open level, however, it continued to form higher high and higher low on the daily chart. The index also broke the sloping trendline resistance. The MACD line reached above the zero line. The RSI has entered into strong bullish zone as it has moved above the 60-mark, for the first time since April 2022. Importantly, the 20DMA entered the uptrend, which is a positive sign.

Interestingly, the Banknifty index is inside the leading quadrant. But, the formation of a bearish candle by forming open almost identical to the high candle on daily chart is a concern. It faced resistance at the 78.6 retracement level of the prior swing. The level of 35292 is likely to act as a strong barrier as the 100DMA is placed around this region. Above this, the index may continue its upside move. But, a move below the Friday low of 34997, would be negative. Overall, the short term trend for the Bank Nifty looks positive, but the formation of bearish candle on the daily chart near to the 100DMA, is a sign of caution. Hence, aggressive day traders should go long once Nifty sustain above the 100DMA.

The Strategy for the day:

The Banknifty needs to close above 35291 for a strong bullish move. Above this level, it can test 35640. Maintain a stop loss at 35120. Above 35640, continue with a trailing stop loss. But, a move below 35120 is negative, and it can test 34940. Maintain a stop loss at 35234. Below 34940, continue with a trailing stop loss for much lower targets.

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