Bank Nifty continued its higher high and low formation

Bank Nifty extended its winning streak for the fifth day in a row on Tuesday as it gained 0.32%.

On the daily chart, it has formed a bullish candle as close was greater than opening level. It has closed above the previous day high and it has not given any weaker signals. As we expected yesterday, it tested the 38134. As the RSI has reached above 77 zones, it may enter a consolidation. At the same time, the event risk, RBI Monetary policy, is at arm's length; this sector might get further trigger points from the outcome of policy. The MACD histogram is flattened and shows loss in the momentum. Time and Price wise, the rally looks over-extended in an impulsive way.

 All the impulsive moves must enter the counter-trend consolidations. The 200 DMA is currently placed at 36394, this may act as major support for now. It is trading 9.02% above the 50DMA and 5.65% above the 20DMA. On a 75-minute chart, the MACD line and RSI have developed a negative divergence, which may be an early indication of a reversal. It is better to be cautious about the trend. A consistent move below 38000 will gives us the weaker signals. Wait for RBI policy and the market reaction after 15 minutes. Till then, wait patiently.

Strategy for the day

The Bank Nifty has formed a hanging man candle on a 75-minute chart and developed the negative divergence on RSI. That said, on the daily chart it continues to form a higher high and higher low formation. Going forward only a move above 38180 is positive, and it can test 38300. Maintain a stop loss of 38090. Above 38300, continue with a trailing stop loss. But, a move below 38000 is negative, and it can test 37700. Maintain a stop loss at 38115. Below 37700, continue with a trailing stop loss.