Nifty and Bank Nifty Analysis and Trading Strategy for September 29, 2023

Nifty View:

The Nifty has formed a substantial bearish candle and an outside bar. After three days of consolidation, Thursday’s move has signaled a fresh breakdown. The Nifty opened near the 20 DMA and closed at the previous day’s low. It has formed one of the most bearish candles in recent times, declining by 3.60% from the recent lifetime high in just under two weeks. The previous correction took five weeks and was a 3.84% decline. We had earlier cautioned about this impulsive move. The Nifty has now closed below the 10-week average and the 50 DMA decisively. The 50 DMA has also entered a downtrend. On Thursday, the index registered a distribution day as volumes were above average and the highest in the last six days.

The broader market and sector sell-off indicate more weakness to come. The fall in global markets and the rise in the Dollar index are some of the reasons behind Thursday’s decline. We also previously cautioned about the low VIX regime, which has now broken out of the 17-week range, increasing by 20% in the last four trading sessions.

As we mentioned earlier, the recent high of 20,222 serves as the intermediate top. For the Nifty to resume the uptrend, it must close decisively above 19,767 with broader market participation. The Nifty has closed below the prior breakout level, indicating a failed breakout, and is also below the 61.8% retracement level of the previous uptrend. The RSI is nearing the 40 zone, and if it falls below this crucial historical support, the market will confirm a downtrend. Building new long positions is not advisable as long as it trades below the 20 and 50 DMA. The market is likely to see sell-on-the-rise moves, and any short-covering bounce may be limited to smaller movements. It’s wise to align with the trend.

Nifty 50 – Strategy for the Day:

The Nifty has formed a substantial bearish candle. Going forward, a move below the level of 19,510 is negative and may test levels of 19,420 followed by 19,360 on an intraday basis. Maintain a stop loss at 19,580 for short positions. On the long side, look for opportunities only if the Nifty moves above the level of 19,750.

Bank Nifty View:

The Bank Nifty has formed a bearish candle with higher volume. Although the index opened above the previous day’s high, it did not sustain at higher levels. Currently, it is 1.39% below the 50 DMA and 1.56% below the 20 DMA. The Bollinger bands have been moving horizontally for the past three days. The MACD line has dipped below the zero line, and the RSI just closed on the 40 support. Despite forming a higher high and higher low candle on Thursday, the price structure remains entirely bearish. The Elder’s impulse system has formed a strong bearish bar, and the KST indicator has given a fresh bearish signal. The index has been trading below the Anchored VWAP support for the last six days and is also below the super trend indicator and Ichimoku cloud. The Stochastic oscillator is extremely oversold, potentially leading to a short-term bounce.

Bank Nifty – Strategy for the Day: 

The Bank Nifty has formed a substantial bearish candle. Before resuming the trend, it may experience a minor bounce. A move above the level of 44,421 is positive, potentially testing the level of 44,700. Maintain a stop loss at 44,330. However, a move below the level of 44,300 is negative and may test the level of 44,185 on the downside. Maintain a stop loss at the level of 44,421. Below the level of 44,185, 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.