Bank Nifty Pullback Rally May Extend On Tuesday But Upside Looks Restricted
Bank Nifty OHLC on 25 Apr 2022
As mentioned in our view over the weekend, Bank Nifty opened with a gap near our first support, down by 252.4 points than previous day’s closing of 36044.75. Immediately after the opening, bank nifty fell further and made a low of 35511.40, which was our second support level given in our analysis.
The selloff was sharp and quick, and as mentioned chasing it was difficult and within no time, bank nifty reversed from the support. It then tested our first resistance 36216 in the first 45mins of the trading session, and made a high if 36270.15.
However, it couldn’t hold the level only to test 36k again during the day. 36k remained pivotal point in the day, as bank nifty moved just around that level for the rest of the day and eventually closed at 36082.35.
What does Bank Nifty’s EOD Chart tell us?
Bank Nifty closed above 36k but still only managed to touch the first resistance 36216 and closed below it. If the rally continues tomorrow, and manages to hold 36216 then we may see bank nifty touching 36500, 36840 levels.
35500-40 will continue to be strong support. Again, the previous bottom of 35016.3 (35k) will act as crucial support technically and psychologically for this month’s expiry.
Bank Nifty is still trading below the 21 Day moving average. The trend of Nifty and Bank Nifty being in completely opposite directions was seen today as-well!
RSI and Volume Check
RSI on daily timeframe took support closer to 40 and has improved from 43.24 to 45.06 on bank nifty fut and from 44.10 to 45.77 on spot.
RSI (45.77) < Weekly RSI (48.10) < Monthly RSI (58.12)
Though the RSI has improved a bit, RSI on the daily, weekly and monthly are still below 60. This could just be a pullback rally, until the RSI sustains above 60 on the monthly timeframe.
A green Volume bar was formed engulfing the previous day’s red volume bar, with a volume of 4.94M.
Bank Nifty Open Interest (OI)
Calls: The highest OI is at 37000 closely followed by 36500 and 36000. OI addition happened on 36k strike price, while some shorts were covered on strike prices from 36300-700. The prices of in the money calls have increased with increase in OI suggesting long buildup on the call side. However, 37k looks to be strong resistance for the April month’s expiry.
Resistance Levels: 36216, 36500, 36840 (Charts + OI)
Puts: The highest OI on the put side can be seen at 36000, followed by 35500 and 35000 strike price. The put premiums have decreased with an increase in OI suggesting short buildup on the put side.
Support Levels: 35740, 35400-500, 35000 (Charts + OI)
The option chain is little in favor of bulls with restricted downside of 35500 and 35k, and restricted upside of 37k for this week’s expiry. Bank nifty may remain in this range, unless it sustains above resistance or moves below the support.
Global Markets
- NASDAQ is slightly up by 28.65 points or 0.22%
- Dow Futures is down by -1.39% or -468 points while posting this view
- European markets have closed in deep red
- SGX Nifty is down by -43.50 points or -0.26% lower
FII, DII, USDINR
- FII sold Rs -1257.83 crores in index futures and sold Rs -5074.49 crores in index options
- USDINR was up by 0.30% and closed at 76.68
Conclusion: Bank Nifty held 35500 and managed to close above 36k. Though option chain is in favor of bulls, chart, RSI and other indicators are suggesting that this could just be a pullback rally.
The upper limit for bank nifty looks restricted near 37k. Overall, all the points still indicate more bearishness unless there is a shift in data and indicators. The rally may extend on Tuesday i.e. 26 Apr 2022 but traders should be cautious on the upside.
However, it would be a shorting opportunity on rise near 36840, 37000 with small stop loss. If bank nifty opens flat or near 36k, one may also try going long if it sustains above 36k, with targets of 36500, 36840 with stop loss below 36k or as per one’s risk.
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