Nifty and Bank Nifty Analysis and Trading Strategy for September 21, 2023

Nifty Section:

The NSE benchmark Nifty 50 nosedived from an overbought and overextended zone. The Nifty opened with a 153-point huge gap down. The index failed to recover from the opening lows. On an hourly chart, the Nifty has formed a lower-high candle. The last-hour short-covering did not help it recover from the lows. For the first time, the Nifty registered a decline of over one percent in recent times. It also recorded a fresh distribution day, as the decline was seen with higher volume than the previous day and above the average volume. Currently, the index is trading just 1.17% above the 20 DMA. As we stated earlier, the index began its mean reversion. Wednesday’s fall has damaged the strong, bullish technical structure. The RSI declined into the neutral zone. The MACD histogram shows a significant decline in momentum. The previous week’s low (19865) or the 38.2% retracement level (19840) is the immediate support level for the index. Below this, the index may test the 20 DMA, which is placed at 19671. The Bollinger bands began to contract, indicating consolidation around the 20 DMA.

Derivative Data:

The derivative data suggests that the Nifty has witnessed unwinding of long positions, and the Bank Nifty has seen a fresh short buildup. About 93 stocks in the derivative segment witnessed a short buildup. In these conditions, it is better to avoid taking long positions.

Strategy for the day (Nifty):

“Strategy for the day: The Nifty has registered a sharp decline. Expect some bounces from Wednesday’s low. A move above the level of 19,921 would be positive, and it can test the level of 20,030. Maintain a stop loss at the level of 19,890. Above the level of 20,030, continue with a trailing stop loss. But, a move below 19,900 is negative, and it can test the level of 19,840. Maintain a stop loss at the level of 19,945.”

Bank Nifty Section:

The Bank Nifty closed at a six-day low and led the broader market fall. The HDFC bank declined by over 4% and contributed over 100 points to the Nifty’s decline. The Bank Nifty declined by 1.29%, the highest percentage fall in recent times. It opened with a huge gap down and formed a lower-high candle on an hourly chart. It closed below the 8 EMA and tested almost the previous week’s low. The RSI declined into the neutral zone. The MACD histogram also indicates a sharp decline in the bullish momentum. It took support on the Anchored VWAP for the day. Currently, the index is just 0.97% above the 20 DMA and 0.92% above the 50 DMA. The Elder’s impulse system has formed a neutral bar. The volumes were recorded above average for the last two days. As the index is in an oversold condition on an hourly chart, there are chances of a relief rally, and hence, a short covering rally may be seen. That said, caution would be warranted.

Strategy for the day (Bank Nifty):

Strategy for the day: The Bank Nifty closed at the crucial support. A move above the level of 45,465 is positive, and it can test the level of 45,690. Maintain a stop loss at the level of 45,365. Above the level of 45,690, continue with a trailing stop loss. But, a move below the level of 45,365 is negative, and it can test the level of 45,220. Maintain a stop loss at the level of 45,465. Below 45,220, continue with a trailing stop loss.

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.