Bank Nifty is on cloud nine; here are the key levels to watch out for on Monday!

Bank Nifty ended with gains of 0.51% on Friday, but it formed a spinning top like candle on the day. 

The index with a gap up and closed below the open and sustained above the previous day's high. Bank Nifty is still trading above all key short-term moving averages. On a weekly chart, it formed a strong bullish bar and decisively closed above the 78.6% retracement level. The index has made a new high, but the RSI is still far below the prior high. It just came out of a squeeze area. In any case, the index opens negatively and closes below the prior day's low, this will be a negative for the sector. 

The RSI confirms the negative divergence and even on the hourly chart, the RSI has formed a negative divergence. The declining KST line is another worrying factor for the index. Currently, it is trading 2.93% above the 20DMA. The Elder impulse system is showing a bullish bias. Both the Nifty PSU bank and Private bank indices are in the leading quadrant and gaining momentum. The PSU Bank index has broken out of a 43-week rectangle base and closed at a new high. The Private bank index is above the prior intermediate swing highs and near the lifetime high. This is a positive sign for the sector. Be with a positive bias, and there are major bearish signals available on the chart. 

Strategy for the day 

Bank Nifty has formed a spinning top-like candle. But on the weekly chart, it has formed a bullish candle, it is better to be with the trend. A move above the level of 40471 is positive, and it can test the level of 40735. Maintain a stop loss at the level of 40340. Above the level of 40735, continue with a trailing stop loss. But, a move below the level of 40340 is negative for the day, and it can test the level of 40071. Maintain a stop loss at the level of 40421.