BankNifty logged a strong recovery, what's next?

On Monday, the Banknifty recoverer over 500 points from the day's low. At one point in time, it had moved above the prior trading session high, however, volatility in the last hour of trade, resulted in shedding some gains from the day's high. On the daily chart, it has formed an outside bar and closed flat to negative. It has led the market recovery from the day's low. The 34EMA and 50DMAs acted as resistance and finally closed below the averages. The 20DMA is in a downtrend. There is no directional change with Monday recovery. On an hourly chart, it has broke the rising channel and closed below it. It also closed just on the moving average ribbon. The daily MACD shows a decline in the bearish momentum. The RSI is still below the 50zone and flattened. Currently, no divergences are visible. For the next 2-3 days, the zone of 38518-39605 will be crucial for direction. Either side breakout will lead to a sharp move. Expanded Bollinger bands show that there is a higher probability, the index may test the recent low if the level of 38518 breaks. It has become a highly difficult task to trade positionally. Trade with strict money management.

The Strategy for the day

The Banknifty recovered from the day's low and closed flat. But, the 50DMA acted as a resistance. Going ahead, a move above the level of 39160 is positive, and it can test the level of 39358. Maintain a stop loss of at the level of 39050. Above the level of 38358, continue with a trailing stop loss. But, a move below the level of 39050 is negative, and it can test the level of 38655. Maintain a stop loss at the level of 39120. Below the level of 38655, continue with a trailing stop loss.