Bank Nifty got confirmation for bearish reversal pattern!

Bank Nifty on Friday formed one of its most bearish candles in the recent times as a result, on a weekly basis it closer below the prior week low along with this it confirmed the bearish reversal of prior week's shooting star candle at a new lifetime high. It closed decisively below the previous week's low and below the 20DMA and other short-term averages. The Elder impulse system formed a strong bearish bar on Friday. It also closed below the 23.6% retracement level. The 50DMA support is just 2.5% away at the level of 38580. This level may act as a support for some time before resuming the downside move. The 38.2% retracement level is at the level of 38192, which is near term target now.

The MACD declined below the signal line, and the histogram shows a strong bearish momentum. The RSI closed below the prior swing low and below the 50 zone. The KST and the TSI indicators have turned bearish. The momentum has picked up on the downside. On an hourly chart, the index is below the moving average ribbon, and the ribbon is clearly in a downtrend. As the distance between the MA ribbon and the index is high, some consolidation or a pullback is possible at some point in time. On the upside, it must close above the 20DMA of 40,183 for the uptrend to continue. Until then, every bounce is an opportunity to sell again. As the volatility increases, the daily trading ranges may also increase. The RBI is expected to rate hike anytime next week, and it is better to avoid taking highly leveraged positions.

Strategy for the day 

Bank Nifty registered a failed breakout and confirmed the bearish implications. Going forward a move above the level of 39700 is positive, and it can test the level of 40278. Maintain a stop loss at the level of 39550. But a move below the level of 39540 is negative, and it can test the level of 39220. Maintain a stop loss at the level of 39700.