Bank Nifty forms a long-legged doji candle; is the bull brigade losing its steam!

The Bank Nifty snapped it's six day winning streak and ended with modest loss on Monday. On the daily chart, it has formed a long-legged doji candle on the swing high. The formation of long-legged doji candle at a swing high show the tiredness of bulls and the exhaustion of a trend. Even though it formed a higher high and higher low candle, the index lacked decisive trend. The recovery in the afternoon session did not sustain at the end. The last hour's selling pressure has resulted in a bearish candle formation as close was lower than open. In any case, if the index closes negative on Tuesday, it may enter a consolidation.

On a lower time frame chart, the index has developed a hidden divergence in leading indicators. The RSI is in overbought condition and flattened. If the index enters a consolidation, It may test the 35900 zone, which is a gap area support. A close below the prior day's low will confirm the countertrend. As of now, there is no bearish signal, but it has given a caution signal. Take out the profits from the table now. Tuesday's high of 37011 will act as a crucial resistance. Only above this the index will resume the uptrend. On the downside, the 200DMA is likely to act as an immediate support which currently stands at 36417.

Strategy for the day

Bank Nifty has formed a long-legged doji candle. A move above 36740 is positive, and it can test 36944. Maintain a stop loss at 36661. Above 36944, continue with a trailing stop loss and it may test levels of 37011. But a move below 36661 is negative, and it can test 36417. Maintain a stop loss at 36740. Below 36400, continue with a trailing stop loss as it may test levels of 36300.