Technical analysis: Nifty Bank

The Banking sector underperformed the other sectors by a heavy margin. Nifty Bank lost about 1.47% or 667 points on Tuesday.

The Banking sector underperformed the other sectors by a heavy margin. Nifty Bank lost about 1.47% or 667 points on Tuesday. Federal Bank (-4.15%), HDFC Bank
(-2.93%), and Kotak Mahindra Bank (-1.84%) emerged as the top losing stocks among their peers while AU Small Finance Bank outperformed other banking stocks and closed higher by 0.47%.

Among the pack, most of the stocks closed lower. On the technical chart, the index had formed a strong bullish candle on Monday which also constitutes of a massive gap of about nearly 2%. However, on Tuesday, the index nearly replicated this candle but on the downside. It formed a strong bearish candle and closed at day’s low. In the past two days, the 38800-level acts as strong resistance which the index was unable to pass through. However, the index still trades above all the key short term and long term moving averages. However, with today’s bearishness, we expect index can fill the gap and fall till the level of 37000 where it can find strong support. Moreover, its 200-DMA lies just below this level, so the index has a limited downfall below the 37000-mark.

The 14-period daily RSI has dipped to 61 but is still in a bullish territory. The MACD line is still above the zero line and signal line, indicating strong momentum of the index. As per the Guppy’s Multiple Moving Average (GMMA), the index has strong strength.

As per the weekly option data of 7th April, maximum open interest in the call side is found at 38500. Interestingly, highest addition of open interest is also done at this strike. Thus, 38500 poses as strong resistance for the index. On the put side, 36000 has the highest open interest.

 Considering above points, the index is expected to trade in a wide range of 36000-39000 with huge volatility. However, medium term outlook remains stable as validated by moving averages and strong price structure on weekly timeframe.