Bank Nifty to face litmus test today!

After opening with a gap down, the Bank Nifty recovered nearly 500 points from the day's low. At one point in time, it had attempted to move above its prior day's high, but it failed to do so.

As profit booking emerged at higher levels due to weekly expiry. In the end, Bank Nifty settled with gains of 0.37% With the support of PSU banks. On the daily chart, it has formed a bullish candle as the close was greater than the open. It closed above the 5EMA. But, it formed an identical and lower low candle. The momentum is further declined because of this structure. On an hourly chart, it opened below the moving average ribbon but closed above it. After the recovery in the first two hours, it formed all indecisive candles. MACD line moved horizontally, showing no momentum. On the weekly chart, the index undergoing the process of forming a long-legged doji candle.

Friday's closing will be crucial as it gives us a weekly closing, which may give directional bias for the short term. In any case, a move below 41140 will give weaker signals. The first-hour bar high and low would be important to watch out for as a decisive close on either side of the bar would give a directional trend. If trades below the first-hour bar low, short built-up will increase and vice-versa.

Strategy for the day

Bank Nifty recovered intraday losses closed positively. On the daily chart, it formed a bullish candle as the close was greater than the open. Going forward a move above the level of 41400 is positive, and it can test the level of 41700 on the upside. Maintain a stop loss at the level of 41150. Above 41700, continue with a trailing stop loss. But, a move below the level of 41148 is negative for the index, and it can test the level of 40900 on the downside. Maintain a stop loss at the level of 41500. Below 40900, continue with a trailing stop loss.