Bank Nifty forms an inside bar; level of 38134 is a key resistance to watch out for now!

Bank Nifty ended the final trading session of last week with modest gains of 0.44%, meanwhile on the weekly basis it extended its winning for third straight week. However, it failed to cross the 61.8% retracement (38134) level of the prior downtrend. It tested this level for four days, but it failed to cross it decisively. It formed an inside bar on Friday. Before that, it had formed a bearish engulfing candle but did not get a confirmation for bearish implications. It has formed three consecutive bearish or indecisive candles in the last three days. Because of sideways movement and four parallel highs, the momentum has declined. Still, it is trading above the key moving averages. As the Nifty formation of Friday's candle resembles shooting star candle at a strong resistance zone, it is signalling a probable retracement is likely.

The RSI is in over-bought condition but not giving any signs of weakness. The weekly momentum is still strong. The Elder impulse system has formed three consecutive neutral bars. The Index is also above the Anchored VWAP resistance. The prior swing high is at 38759. A close above 38134 will test the prior swing high. In any case of a decline below 37565, it will lead to a fall towards 200DMA. A close below the prior bar low is the first sign of weakness. It is better to wait for these levels to take positions; otherwise, be on the sidelines.

Strategy for the day

As Bank Nifty traded in the sideways or ranged manner on a policy outcome day, it is better to wait for clarity on the trend. A move above 38134 is positive, and it can test 38234. Maintain a stop loss at 37935. Above 38234, continue with a trailing stop loss. But a move below 37935 is negative, and it can test 37734. Maintain a stop loss at 38134. Below 37734, continue with a trailing stop loss.