Banknifty bounces back: A bullish candle and successful retest suggest positive momentum, but rollovers loom large!

The Banknifty recovered almost 400 points from the days low to end the session near the days high with gains of 0.35%. On the daily chart, index has formed a bullish candle and it has negated the previous day's shooting star candle as there was no follow up selling seen after formation of shooting star. On Wednesday, it retested the breakout level and bounced, so it has avoided the failed breakout scenario. 

For now, there is no chance for short selling unless the index is not able to cross the 42865.55. The rollovers will play a major role as the monthly expiry is on the cards. The implied volatility has increased to 14.26 from 11.92 last Thursday but is still below the average levels of expiry. As the index is trading above all the key moving averages and has cleared all the resistances, it is better to keep away from the short positions. If the index trades above the level of 42865, be with a positive bias, and it can test the level of 43080 on the upside. Only in the case of a decline below the level of 42600 it will be a negative sign for the index. It would better to stay away from aggressive shorting in the index and buy on dips strategy could be a prudent approach to follow as long as the level of 42600 is held by the Banknifty.  

Strategy for the day 

The Banknifty formed a bullish candlstick pattern and closed near the days high and more importantly it is trading above it's crucial moving averages, hence, going forward a move above the level of 42870 is positive, and it can test the level of 43080. Maintain a stop loss at the level of 42600. Above 43080, continue with a trailing stop loss. But, a move below the level of 42600 is negative, and it can test the level of 42486. Maintain a stop loss at the level of 42870.