Nifty and Bank Nifty Trading Strategy for October 16, 2023

Nifty View:

The Nifty closed above the previous week’s high, forming a sizable bullish candle on the weekly time frame. On Friday, Nifty opened with a significant negative gap but was able to recover over 150 points from the day’s low. However, profit booking in the last hour of the day resulted in an erosion of 50-60 points from the day’s high. This profit booking was observed on the back of higher volumes, indicating that traders were not confident about holding their positions over the weekend. Importantly, the 20 DMA and the upper band are now in a downtrend, suggesting the likelihood of further price contraction. Closing below the 50% retracement level is another negative factor. Currently, it is just 0.73% above the 50DMA. The Nifty faced resistance at the middle point of the equidistance upward channel. Even though the index recovered from the day’s low, Friday’s 0.22% decline, coupled with higher volume in the last seven days, meets the distribution day criteria. A sharp decline in Bank Nifty from the day’s high is another cause for concern. A decisive close above 19883 is positive and will support the upward move. However, a close below 19635 will be negative and mark the end of the counter-trend. The Nifty may trade in the 19500-900 range in the near term. A breakout in either direction will likely result in a significant move.

Nifty – Strategy for the day:

The Nifty closed below the previous day’s low. Only a move above 19772 is positive, and it can test 19826. Maintain a stop loss at 19720. A move below 19720 is negative, and it can test 19655. Maintain a stop loss at 19755. Below 19655, continue with a trailing stop loss.

Bank Nifty View:

The Bank Nifty sharply declined in the last hour and formed a bearish candle. The weakness in the PSU banks is a concern for this heavyweight sector. The Bank Nifty is in the weakening quadrant on the RRG charts, as it has also lost momentum and relative strength. Friday’s decline with higher volume meets the distribution day criteria. At the same time, Thursday’s inside bar confirms the bearish sentiment. The index failed to test the 38.2% retracement level (44757). Interestingly, the Anchored VWAP support and resistance are at the same level, around the 44870 zone. The major support is in the 43975-886 zone. For a decisive directional bias, a breakout on either side is essential. If the index closes below 43886, a major low will form, signaling a trend reversal. The Bank Nifty remains below all the key moving averages, with the MACD in bearish territory and the RSI declining and nearing the bearish zone. As long as the index trades below 44500, it is advisable to stay away from long positions.

Bank Nifty – Strategy for the day:

The Bank Nifty closed near the day’s low and formed a bearish candle. Only a move above 44320 is positive, and it can test 44540. Maintain a stop loss at 44260. Above 44540, continue with a trailing stop loss. However, a move below 44230 is negative and can test 44000. Maintain a stop loss at 44320. Below 44000, 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.