Nifty and Bank Nifty Analysis and Trading Strategy for October 05, 2023

Nifty View:

The Nifty recovered over 100 points from the day’s low and closed almost at the opening level, forming a Dragonfly Doji pattern. It bounced from the lower Bollinger band. If Wednesday’s low is protected, expect a decent bounce from hereon. 

On Wednesday, Nifty opened with a gap down and smartly recovered from the lower levels; however, the recovery failed to fill the gap. The positive divergence in the hourly chart remains valid, and the Hourly MACD is also on the verge of giving a bullish signal. Only if the Nifty fails to hold Wednesday’s low of 19,333, it may test the major low of 19,223. The daily RSI is precisely at the 40 level, and a decline below this level would signify entry into the bearish zone. The MACD line is already below the zero line. The Nifty is now 0.89% below the 50 DMA and 1.77% below the 20 DMA. As previously mentioned in the technical note, the mean reversion is complete. Now, the price behavior becomes crucial. If the Bollinger bands turn downside (currently moving horizontally in a contraction mode), anticipate a sharp downside move. The increased volume declines are a cause for concern. If distribution intensifies, selling pressure across the board will increase. 

Nifty – Strategy for the day:

The Nifty has rebounded by more than 100 points from the day’s low, indicating signs of a smaller pullback. A move above the level of 19,445 is positive and could test the level of 19,530. Maintain a stop loss at the level of 19,390. However, a move below 19,400 is negative and could test the level of 19,320 and below.

Bank Nifty:

The Bank Nifty experienced a sharp decline after opening with a negative gap. It found support at the previous low on September 01. The index is now very close to the crucial support of 43,600, which is the neckline of a double top pattern. Thursday’s decline, coupled with higher volume, caused the 50 DMA to enter into a downtrend. Despite recovery efforts in the afternoon session on a weekly expiry day, it was insufficient to fill the opening gap. The index is currently 1.92% below the 50 DMA and 2.31% below the 20 DMA, erasing all gains from the first half of September. The lower Bollinger band turning downward indicates the potential for further downside. It is also significantly below the Ichimoku cloud. The weekly Anchored VWAP support, anchored at the March low, is at 43,850 and was tested on Wednesday. Therefore, for the next two trading sessions, the 43,600-43,850 support zone is critical. In any case, if it closes below 43,600 on a weekly basis, the Bank Nifty will confirm a long-term downtrend. Any bounce above the gap area is considered positive. 

Bank Nifty – Strategy for the day: 

The Bank Nifty closed at a crucial support zone. A move above 44,050 is positive and could test the level of 44,225. Maintain a stop loss at 43,930. However, a move below 43,930 is negative and could test the level of 43,600. Maintain a stop loss at 44,050.

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.