Technical & Derivatives Report
Nifty Bank Outlook - (21849)
The Banking index opened on a flat note in yesterday's session.
However, right from the word go the index started correcting and
within 15 minutes, the index was down significantly over previous
weeks close. It crept lower till the close and ended the session with
a loss of over 800 points.
Yesterday's move in the banking space was certainly unexpected
given the consolidation phase in Nifty. However, the price
corrected throughout the session with no pull back moves in
between. On the daily chart, the index is seen trading in a channel
with the lower end of the channel seen at 21500-21550 range.
Traders are advised to stay light on positions as of now and be
vigilant on how the index bechaves around the mentioned
support. The immediate resistance for the index are seen around
22250 and 22400.
Support 1 – 21550 Resistance 1 – 22250
Support 2 – 21500 Resistance 2 – 22400
Exhibit 1: Nifty Daily Chart
Trading for the week started marginally higher owing to favorable
global cues. However, within a few moments, the lead disappeared
to decouple with global peers first. After this what we witnessed was
one of the rarest actions in our market. The Nifty and Bank Nifty
looked completely divergent. The direction was similar (downwards)
but the proportion of the decline was extremely wide. Looking at
Nifty, it appeared as if markets are consolidating with mildly
negative bias; but looking at banking index, it appeared as if there
is no tomorrow. Yes, many times we see Bank Nifty underperforming
the benchmark but yesterday’s divergence was something different.
Fortunately, Reliance and heavyweight IT counters were the saviors
in case of Nifty, otherwise, taking their contribution out, the Nifty
also would have closed with severe cuts.
Now let’s dig into a bit of technicals. As far as Nifty is concerned, we
continue to see 11050 as a sacrosanct support and till the time it
trades convincingly above it, there is no reason to worry. On the flip
side, if this lead has to extend, the benchmark needs to stay beyond
11250, which would unfold the next leg of the rally. Meanwhile, the
range of 11250-11050 should be considered a consolidation band.
Now, the breakout in either direction is solely dependent on how
Bank Nifty performs over the next couple of days. If banking
heavyweights extend their correction, the Nifty will see a breakdown;
whereas a breakout above 11250 is out of question without the
contribution of banking space.
Exhibit 2: Nifty Bank Daily Chart
At this juncture, traders are advised to stay light and should keep a
close watch on above mentioned levels as well as scenarios. As of
now, our inclination is still on the positive side and hence, we remain
hopeful as long as key levels are successfully defended.
Support 1 – 11085 Resistance 1 – 11200
Support 2 – 11050 Resistance 2 – 11250