Bears are seen tightening their grip in Bank Nifty

On Thursday, the Bank Nifty ended lower by 0.51%. With this fall, it ended below it's prior trading session low.

Interesting thing to notice was that even a small bounce during the day was used to liquidate long position. On the weekly chart, the index is forming a strong bearish bar from the resistance. Importantly, the PSU Bank index, which recently outperformed, has led the fall on Thursday. The index has taken support on July 07 gap area on Thursday and from this support level, it did witness a minor bounce back. It sharply declined below the Anchored VWAP, plotted on the April 04 major swing high. The index is still trading 5% below the 200DMA, while it is just 1.24% above the 50DMA. The Elder impulse system has formed the three consecutive neutral bars. As the decline is three days old, the histogram shows a fall in momentum. The RSI is below the 55 zone, and declined below its nine periods average, which is a first sign of weakening of momentum. The relative strength momentum is in the neutral zone. On an hourly chart, the Bank Nifty is trading below the moving average ribbon, along with the MACD line below zero line, which is bearish. As the global markets are trading weak at this juncture, a decline below 34550 will lead to a further sharper decline. Only two stocks in the Bank Nifty were able to close in the positive territory on Thursday. For now, it is better to wait for decisive move below 34550. While, on the upside, a move above 34980 would be positive.

The Strategy for the day

The Bank Nifty closed at key support, and it has tested the gap area. A move above 34980 is positive, and it can test 35250. Maintain a stop loss at 34616. But a move below 34550 is negative, and it can test 34405. Maintain a stop loss at 34727.