Bank Nifty records the lowest range in seven days and forms NR7 bar formation - Are we headed for a big move?

One index that has been particularly in focus lately is Bank Nifty, which has been showing some interesting patterns and trends in recent sessions.

The stock market is a complex and constantly evolving landscape, and for those who are interested in investing or trading, it can be a challenge to keep up with all the changes and fluctuations.

As we can see from the opening data, the Bank Nifty opened at 42218.50 on Thursday and it registered an intraday high of 42378.15 and a low of 42108.85 before settling at a level of 42269.50, which was higher by 0.27%. While this might seem like a small change, it is worth delving deeper into the daily chart to see what is happening.

Technical Analysis

One interesting observation on the daily chart is that the Bank Nifty has formed a candlestick pattern that resembles a high-wave candle. This pattern indicates indecision in the market and could suggest that there is some uncertainty about the future direction of the index. However, it is also worth noting that the index formed a higher high and higher low candle compared to its prior trading session, which could indicate some bullish sentiment in the market.

Despite this, the Bank Nifty remains within the range of Monday's trading session, which suggests that there is still consolidation taking place. This consolidation is likely due to stock-specific actions, which have been more prevalent lately as the market has seen a strong up-move from the March lows.

Interestingly, the range for the day was only 269 points, which is much lower than the 10-day average range of nearly 430 points. This resulted in the formation of an NR7 bar on the daily chart, which is the narrowest range of the last 7 days. This could suggest that there is a lack of volatility in the market and that traders are waiting for a clear signal before making any significant moves.

Strategy for trading 

One important point to note is that the Bank Nifty has retraced the decline of the last leg faster than it has since December last year. This decline, which was from 42015.65 to 38613.15, took about seven weeks to complete, but it has been completely retraced in just three weeks. This could be an early indication of a turnaround to a larger degree. 

Looking at the daily chart, the immediate support for the index is placed around the 5-EMA, which stands at 42086. As long as the index trades above this level, a buy-on-dips strategy should be the way to go. However, if the index closes below this level, it would give the bulls an upper hand, and we might see the index testing the lows of Monday's session, which are placed around 41799. 

Overall, we can expect the Bank Nifty to continue moving in a range, and once it manages to sustain above the high or low of Monday's session, a directional move is expected. 

As for the strategy for the day, traders should note that the Bank Nifty formed an NR7 bar on the daily chart and has been trading in a very tight range of 42360- 42115 for the last two days. A move above the level of 42360 is positive and could test the level of 42540, while a move below the level of 42086 is negative and could test the level of 41900. Traders should maintain a stop loss at the level of 42240 and continue with a trailing stop loss above 42540 or below 41980.