Will Bank Nifty continue its outperformance?

Bank Nifty registered a 2.96% gain during the last week and it outperformed the Nifty index.

 With this strong move, it has managed to close above the prior swing high and at the week's high, which reflects strength in the move. During the last four weeks, it gained by 4359 points or 12.57%. On a daily chart, the upper Bollinger band resistance is placed at the level of 39494, which shows it has the potential to test this level. The weekly upper Bollinger band is at 39121, which it has almost tested on Friday. The RSI closed above the 80 zone, at an extreme level. If the RSI declines below the 76-70 zone, we may get reversal signals. The MACD histogram is flattened. It has formed a hanging man candle at the new swing high, which is showing some caution and exhaustion of the trend. The Elder impulse system has formed strong bars. The index is trading 10.64% above the 50DMA and 5.02% above the 20DMA. There are no bearish or weaker signs currently available. The overbought cannot be considered as a bearish sign. A retracement will cool off the overbought condition. For now, only a slow momentum is a worry. Continue with the trend with a prior low as a stop loss. Only a close below the prior low will give us the weaker signals.

Strategy for the day

The Bank Nifty closed at the day high, and it is sustaining above the prior swing high. A move above 39089 is positive, and it can test 39370. Maintain a stop loss at level of 38950. Above 39370, continue with a trailing stop loss. But a move below 38950 is negative, and it can test 38780. Maintain a stop loss at 39042. Below 38780, continue with a trailing stop loss.