On the weekly chart, Nifty Bank formed an Inside Bar candle. The banking index closed the week above 50-day EMA, but was unable to cross the 20-day EMA. The index made a high of 42,715.65 during the week, before closing at 42,506.80 on Friday. It rose 0.31 per cent for the week.
The immediate support range for the banking index has shifted to 41,500-41,300 while a key resistance is placed at 43,600 level.
A momentum indicator RSI inclined on the positive side. Among private banks, HDFC Bank traded with higher-high formation and has a positive momentum and, therefore, should perform well in coming days. While among PSU banks, Bank of Baroda has bounced from the support level and can perform well, as it is trading above 50-day EMA.
Nifty Bank January futures traded with a 42-point premium.
Nifty Bank traded in a tight range of 41,500-43,600 levels for the last five weeks. Going ahead, we can witness a buying from lower levels. In the last two weeks, Nifty Bank has managed to close above the 42,300 level. We saw a Doji-like formation on the weekly chart, which indicates uncertainty about the trend. Nifty Bank can move towards its all-time high levels once it crosses and sustains above the initial barrier of 43,500-43,600 range.
Nifty Bank Put options OI distribution shows that 42,000 has the highest open interest (OI) concentration, which may act as support for the current expiry. Nifty Bank Call strike of 43,000 witnessed significant OI concentrations and may act as resistance for the current expiry.
The bears would not be in command until the 43,500 level is taken out, as the index has experienced tremendous resistance around this level over the past five weeks. The main trend appears to have run its course. Short-term investors can buy high-quality banking stock at these prices.
(Bagadia is Executive Director at Choice Broking)