Bank Nifty is showing signs of exhaustion!

Bank Nifty underperformed the Nifty on Wednesday as the former registered gains of 0.70%, while the latter gained over 1%. The Bank Nifty trimmed nearly 200 points from its day’s high and settled below 36000 mark. It faced strong resistance at the prior swing high. It opened with a huge positive gap and closed below the opening, which resulted in the formation of small body bear candle. Formation of such a pattern at the crucial resistance point, indicates exhaustion after a strong move. As it failed to close above the prior swing high, we need to be cautious at the current juncture. On the front of the indicator, there is no negative bias visible. The daily 14 periods RSI is above the 60-mark and is above the prior swing high, the MACD line is also above its prior swing high, and the histogram shows an increased momentum. After 13 weeks, the index closed above the 20weeks moving average. Now, this average of 35196 will act as support for now, which has acted as a supply line previously. The Weekly MACD has given a buy signal now, but it must sustain above the current level. The weekly RSI must sustain above the 55-zone level. With daily candle giving a caution sign, it is better to wait for clarity on the trend continuation. That said, short-term trend looks positive as the index is trading above its 20,50 and 100-DMA. 

 Strategy for the day

Bank Nifty has formed lower high and low candles on the hourly chart. It had given up the initial gains. Going forward, sustaining above the level of 36021 is positive, and it can test 36431 which is also the 200DMA. Maintain a stop loss at 35900 for long position. But, on the downside a move below 35900 is negative, and it can test 35530. Maintain a stop loss at 36021.