Bank Nifty forms an inside bar; 5EMA holds the key in the near term!

Bank Nifty took support on 5EMA for the second successive day and bounced about 200 points from the day low and formed an inside bar. 

 It traded within Friday's range. It formed a small bodied candlestick pattern. Going forward, it needs to close above the level of 41483 for a bullish continuation. Interestingly, the 20DMA has crossover the 50DMA, which is a positive signal for the index. Now, the index is trading above its short- and long-term moving averages. That said, the momentum has declined further. The RSI failed to close below its nine periods average. It is still in the strong bullish zone. All the short and long-term moving averages are in the uptrend. It is better to wait for the index to form a higher high for the continuation of the trend. Though it is an underperformer compared to the broader market and benchmark indices, we cannot be with a bearish bias on the index. 

The PSU banks have been stronger and leading the sector index for the last few weeks. Any kind of profit booking may lead to a counter-trend consolidation. For now, better to wait for higher high formation and a close above the level of 41483 for a positive view on the index. 

Strategy for the day 

The Bank Nifty formed an inside bar as price traded within the range of prior bar, but it closed in the top quartile of the day and regained strength. Going forward a move above the level of 41324 is positive, and it can test the level of 41483. Maintain a stop loss at 41230. Above 41482, continue with a trailing stop loss. But a move below the level of 41137 is negative, and it can test the level of 40978. Maintain a stop loss at the level of 41220. Below the level of 40978, continue with a trailing stop loss.