Technical talk: Nifty Bank

NIFTYBANK closed marginally higher on Tuesday and outperformed other sectoral indices and Nifty.

The index closed at 37747.40, up by 0.36%. In the past few days, the index traded in a range-bound manner between the level of 38000 and 37300. After hitting the previous week’s high at 38765, it skidded to the level of 37300 and consolidated thereafter.

Interestingly, all the moving averages have converged nearly to the level of 36700. Moreover, the level of 36500 happens to be the key support level as it acted as resistance before it was decisively broken. The 14-period daily RSI is placed just below 60 and is in the sideways zone. The other momentum oscillators and technical indicators also point towards the neutral view of the index.

From the F&O data, we find that 38000 has the highest open interest on the call side, while the maximum outstanding contracts lie at 37500 and 37000 on the put side for the next weekly expiry. Interestingly, aggressive put writing has been done at the strikes from 37000 to 37500, indicating that the index is unlikely to face any severe downside from these levels. The PCR for this week’s expiry is at 1.03, which indicates slight bullishness.

Analyzing the monthly expiry data, we find that straddles have been created at the strike of 37500, which has a collective premium of about Rs 1400. Thus, market participants are expecting a wide range of 36100 and 38900 for the April month.

Analyzing the above points, we expect Nifty Bank to trade in a broader range of 38000 to 36500 in the upcoming days. However, the index is likely to make a huge move once it breaks out from this range on either side.

HDFC Bank is likely to declare results this Saturday and is expected to bring volatility to the index. During such times, it is always advisable to keep trading positions light and find possible clues to anticipate further trends in the market.