How is Bank Nifty expected to perform this week?

Last week, the banking index gained about 138.45 points or 0.4%. However, it traded with huge volatility and made a total swing of about 3219 points or 8.9%. The index found strong support at its 32155 and bounced sharply from there.

Meanwhile, it faced stiff resistance at 35374. On the weekly timeframe, the index formed a sizable bullish candle with long shadows at both ends. Moreover, after four weeks of continuous weakness, the index has shown signs of recovery.

The index was subjected to huge gap-ups and gap-downs owing to global sentiments. On the daily timeframe, the index is still placed all the key short term and long term moving averages. The 14-period daily RSI has improved but is placed below its prior swing high. Thus, the sentiment is still bearish. However, with last week’s performance, market participants do not anticipate a strong downside.

As per the technical chart, 34000 level will hold the first line of support, followed by 32948.90. The strong support lies at 32155.35, which happens to be its previous week’s low. A breakdown from this level shall be met with a huge downtrend, however, such a situation seems unlikely for now. On the upside, 35374.15 will be the first resistance which is the previous week’s high. Moreover, 20-EMA also lies near this level. Next resistances are 36000 crucial horizontal level and 36684, which is 200-DMA. As per options data, maximum open interest lies at 36000, followed by 35000 on the call side. In the case of puts, 33000 and 32500 have maximum contracts outstanding. However, the PCR lies at 0.64 which indicates bearish sentiment among market players.

Thus, considering the above points, we can expect Bank Nifty to trade in a broad range of 36700 and 32000. However, the index is expected to trade higher as the global sentiments are seen improving. Thus, the focus must on the upside rather than the downside. However, it is likely to face huge volatility and it is advisable to keep trading positions light until a clear trend emerges.