Bank Nifty closed near its peak, indicating strong upside potential. Targeting 53,600, it must first surpass resistance at 52,200-600. Support lies at 51,200 and 50,300, with the MACD signaling further bullish momentum.
Historical trends being challenged.
September has generally been a difficult month for markets, with the last 10 years seeing negative close on the nifty 60% of the time. And then you have the small matter of repetition of history where the Fed pivot triggers a bear phase.
But so far, neither economic data nor the price action has given much insight to what could unfold post 18th September, when the Fed is likely to cut rates by 25bps.
Nifty’s turbo charged move
The turbo charged upmove towards the close of Thursday took us by surprise, given how successful bears have been throughout the week until then to stifle upside momentum. But, intrigued was how similar the recent few days’ pattern looks, in comparison to that of late July, in the lead up to August’s collapse from the peak.
That VIX did not collapse commensurately on either Thursday or on the day after also gives enough reason not to expect a major follow through push higher in the subsequent days. That said, we still have enough days until 18 Sep, to meet 25800, our long standing upside objective. Until then dips are expected to be contained near 24240 for a slow upswing, but a direct fall below 24150 could let bears dominate.
BankNifty gearing up for a big move
Bank Nifty witnessed rejection trades on Friday, not only because of the massive upsides of Thursday, but largely because of the open near the Bollinger band upper range, giving little incentive for bulls to push any further on the last working day of the week.
But by close, Bank Nifty had recovered all of the lost ground of the day, and closed near the peak, a sign of appetite for larger upsides in the days to come. MACD is just above zero line, and appears ready to put a distance between it and the signal line, adding more weight to the upside view.
We should ideally be aiming for 53600, but 52200-600 is indeed a strong challenge that will have to be overcome first. With this in perspective, our downside marker is placed near 51200 the base of Thursday’s bull candle, with further support seen at the Bollinger band lower extremity of 50300.
Sectoral Cues
Nifty PSU Bank has been in a downtrend for the last couple of weeks and seems to have built a base around the horizontal support zone of 6500. The index has formed a hammer candle showing rejection at lower levels hinting at a pull back. 14-Week RSI is currently around 44 and the momentum indicators are in the oversold territory. Stocks like SBI, Bankbaroda, PNB, IOB, Canbk and Indian banks should lead the recovery.
Nifty Financial Services Index has formed a BullishEngulfing candle in the weekly time frame. With 14 week RSI hovering over 60 and 95% of the stock trading above 100 and 200 DSMAs indicate strength. Expect banking stocks and pure finance stocks like Bajaj Finance, Bajaj Finserv, Cholafin and Shriramfin to lead the gainers. Expect insurance stocks like HDFCLife, SBIlife and ICICIPruli to witness profit booking.
First published in Financial Express
