During the week gone by, the bank nifty initially started with some
consolidation however in the latter half we witnessed wild swings
on both sides to eventually end with a loss of 1.31% against the
previous week close tad above 23500.
After its splendor run in the previous two weeks of more than 3500
points; the bank index witnessed some profit booking during the
last week on the back of weakness in the global cues. We sense
this profit booking as healthy and the bank nifty is just re-testing
its previous breakout levels at 22700 which coincides with
20DEMA. As long prices hold this said levels the bulls will have the
upper hand. After Thursday's sharp correction, we witnessed good
stock-specific action from the banking space on Friday and traders
are hence advised to keep a stock-specific approach. As far as
levels are concerned, immediate support is placed around 23150
and 22970 whereas resistance is at 23920 and 24150 levels.
Key Levels
Support 1 – 23150 Resistance 1 – 23920
Support 2 – 22970 Resistance 2 – 24150
Exhibit 1: Nifty Daily Chart
Sensex (39983) / Nifty (11762)
Last week’s price action can be divided into two parts where the first
half was more of a consolidation with no major movement and the
latter one brought some volatility in the market. We managed to
clock the psychological mark of 12000 but failed to sustain there. In
fact, due to sudden sell off in global markets on Thursday on the
fears of a second wave of coronavirus hitting the major European
countries, we witnessed a sharp decline in our markets. Fortunately,
there was no follow through to this as we saw modest recovery to
end the week well above 11700.
In the last couple of weeks, we have seen a remarkable recovery in
our market after testing the 200-SMA level of 10800. Since the move
was extremely swift and markets had a winning streak of 10 straight
sessions before Thursday, any uncertainty was likely to trigger profit
booking and this is exactly what we have seen. Now, purely looking
at charts, this down move should only be interpreted as a pull back
towards the recent trend line breakout points. This coincides with the
20-day EMA level of 11600. Hence, all eyes would be on this level in
this week. However, since the fall has to do with the global
uncertainty, it would be important to see how things pan out there
and if things worsen, we may see the market correcting further. A
close below 11600 would apply brakes on the recent optimism and
we may then see some extended correction in the market. Till then
there is no reason to worry as we may see markets resuming the
strength beyond 11850-11900 to surpass the 12000 mark
convincingly.
Exhibit 2: Nifty Bank Daily Chart
In the week gone by, we witnessed some sectoral shift in the market
in the second half. The recent outperforming IT space had seen some
decent profit booking along with Reliance; whereas on the other
side, the banking which was considered to be a laggard has shown
some serious strength to support the market. Hence going ahead, if
Nifty has to resume the uptrend, the banking clearly plays a vital role
in this. Apart from this, Midcaps are yet to perform and hence, the
breakout in this index should bring back some excitement in the
traders’ fraternity.
.Key Levels
Support 1 – 11680 Resistance 1 – 11850
Support 2 – 11600 Resistance2 – 11900