Bank Nifty is in a tight spot!

Bank Nifty witnessed a highly volatile day on Friday as it moved in a range of over 500 points.

Though it closed with a modest cut of a little over 0.2%, the index had formed a bearish candle on the daily chart as the closing was lower than the opening level. Furthermore, Bank Nifty closed below the 200EMA for the third straight day in a row. After a doji candle, it formed a sizable bearish candle, which is negative. As we expected, the index already tested the 39620, which is the 38.2% retracement level of the prior uptrend. A decline below the level of 39419 means it would form another lower low. The 200DMA support is placed at the level of 39216.

For next week the range of 39216-419 zone will act as crucial support. A bounce and close above the prior day's high, the level of 40348, will be positive for Bank Nifty in the short term. Any kind of short covering may lead to a sharp bounce. We may experience intraday bounces too, but whether it would sustain or not, is a big question.

The weekly RSI formed a lower low which is bearish. The daily RSI is on 30 and may enter into the oversold zone. It is better to avoid fresh short positions below the level of 39400. Better is to wait for the levels to trigger and act accordingly.

Strategy for the day

The Bank Nifty has formed a sizable bearish candle after a doji candle, which is negative. A move above the level of 39950 is positive, and it can test the level of 40200. Maintain a stop loss at the level of 39830. Above 40200, continue with a trailing stop loss. But, a move below the level of 39880 is negative, and it can test the level of 39600. Maintain a stop loss at the level of 39950. Below 39600, continue with a trailing stop loss.