Will Bank Nifty continue its golden run?

The level of 42000 emerges as a make-or-break point!

The Bank Nifty extended its winning streak for the fourth straight day on Monday as it ended the session with gains of about 0.30%. It showed relative outperformance when compared to Nifty.

On the daily chart, the Bank Nifty formed an open high candle, which is also called a bearish belt hold. Though it formed a candle which resembles a bearish belt hold pattern, it maintained its rhythm of higher high and higher low. Furthermore, it closed above the previous day's high.

After opening with a gap up, it declined sharply by 900 points in the first hour. Later it recovered most of the losses and retraced more than 50%. The price volume shows the distribution. The momentum is strong, and none of the indicators shows weakness as of now. Only the candle structure of Monday is showing some kind of exhaustion. On the hourly chart, the RSI has developed a negative divergence.

After the first hour of trading, the volumes declined. For any short positions, if you hold, Monday's high is the stop loss to follow. A move below 42000 will indicate the early signs of reversal, in this case, the index is likely to test levels of 41700, where the 100DMA is placed. On the upside, the level of 42603 is likely to be the immediate resistance.

Strategy for the day

The Bank Nifty traded in the first hour's range and it has formed a bearish belt hold-like pattern and not a textbook one. Going forward, a move above the level of 42234 is positive, and it can test the level of 42505 on an intraday basis. Maintain a stop loss at the level of 42170 for long positions. Above the level of 42505, continue with a trailing stop loss. But, a move below the level of 42170 is negative, and it can test the level of 41990. Maintain a stop loss at the level of 42234. Below 41990, continue with a trailing stop loss for a target of 41700.