Bank Nifty marching ahead, but caution warranted as leading indicators are in an extreme territory!

On Wednesday, the Bank Nifty advanced 0.57% and it finally closed above the prior swing high. 

The index formed another indecisive like bar at a high is not a good sign, but it has maintained its rhythm of higher high. On the lower time frame chat, it formed a doji candle at the end. There is a clear sign of losing momentum. At the same time, many leading indicators are in the extreme territory. The RSI is at 82.24. The MACD histogram has been declining for the past seven days while the index is moving higher. On a 75-minute chart, the negative divergence is visible on RSI and MACD. The Mansfield relative strength has further declined. Though the index has made a new high, the RS line did not make a fresh high. The RS Momentum is below 100. Currently, the index is 11.32% above the 50DMA, which is the highest extension in the recent time. Even the daily range has shrunk. Bank Nifty futures has registered the lowest volume since November 04, 2021. For now, there are only signs of over-extension of the rally, but there are no clear signs of weakness available on chart. A close below the prior bar low will give a weaker signal. Stay cautiously positive for now and protect the profits. 

Strategy for the day  

Bank Nifty has for a higher high and higher low candle on the daily chart, but it has formed a doji like candle in the last hour of trade on Wednesday, which signals indecisiveness. A move above 39510 is positive, and it can test 39680. Maintain a stop loss at 39380. Above 39680, continue with trailing stop loss. But, a move below 39350 is negative, and it can test 39160. Maintain a stop loss at 39460. Below 39160, continue with a trailing stop loss