Bank Nifty Trades Above Key Moving Averages: What’s Driving the Momentum?

The Bank Nifty has staged a remarkable rally, surging approximately 2,500 points from its November 21, 2024, low. However, this impressive climb has encountered profit booking, as the index dipped by 84 points (0.16%) on November 26. After reaching prior swing highs and testing the gap area from October 3, 2024, the index now faces a critical juncture. Can it break through resistance and sustain the momentum, or will it consolidate further?

Technical Indicators Signal Strength

The Bank Nifty’s technical structure remains positive, trading above its 20 DMA, 50 DMA, and long-term 200 DMA. Notably, the 20 DMA has turned upward, reinforcing bullish sentiment. On November 25, the index witnessed its highest trading volume since October 28, with a surge of activity in the last 90 minutes, indicating growing interest.

Momentum indicators are also signalling strength. The RSI has crossed prior highs, moving into a strong bullish zone, while the MACD has given a fresh bullish signal. Additionally, the Bollinger bands, after 33 days of consolidation, have started to expand, hinting at a potential breakout.

Key Resistance and Support Levels

The gap area from October 3, 2024, between 52,582.95 and 52,817.80, is acting as a major resistance zone. A decisive close above this range would likely trigger renewed buying momentum and confirm a trend reversal. On the downside, Monday’s gap area and Friday’s low are now crucial support levels. As long as the index trades above these supports, the overall bias remains positive.

HDFC Bank’s Crucial Role

HDFC Bank, a heavyweight in the index, has gained 2.3% in November and recently broke out of an ascending triangle pattern. Its performance will be pivotal in determining the next move for the Bank Nifty. A continued upward trend in HDFC Bank could provide the necessary boost for the index to overcome its resistance.

Cautious Optimism

The Bank Nifty has successfully come out of a strong bearish grip and currently shows positive momentum. However, the October 3 gap area presents a significant hurdle that must be decisively crossed for a new uptrend to begin. Until then, traders should maintain a cautiously optimistic stance, monitoring key support levels and the performance of HDFC Bank, which remains a key influencer of the index’s direction.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.