Nifty and Bank Nifty Trading Strategy for October 19, 2023

Nifty View

The Nifty experienced a sharp decline of 0.71%, signaling increased geopolitical risks amid the ongoing Israel-Gaza conflict. The market’s response was notably bearish, and it registered a distribution day with higher trading volume. Furthermore, a bearish belt hold pattern appeared after it touched last Friday’s high, and this has now been confirmed with the recent decline. Notably, this represents the most significant bearish candle since September 28.

Currently, the Nifty is trading below the 20-day moving average (DMA) and only 0.25% above the 50 DMA. A critical level to watch is 19622; any close below this point could lead to intensified selling pressure. The Moving Average Convergence Divergence (MACD) is on the verge of giving a sell signal, and the Relative Strength Index (RSI) has fallen below the 50 mark. Given the upcoming weekly expiry, Thursday’s volatility may play a pivotal role. It’s advisable to maintain a neutral to bearish bias as long as the Nifty trades below 19848.

Nifty – Strategy for the day

The Nifty has closed below the moving average ribbon on the hourly chart, indicating a negative sentiment. A move above 19750 is considered positive, with a potential test of 19848. Maintain a stop loss at 19680. Conversely, a move below 19660 is negative and could lead to a test of 19565, with a stop loss at 19700. If it drops below 19565, continue with a trailing stop loss.

Bank Nifty View

The Bank Nifty is perilously close to its previous major low and is showing signs of a potential head and shoulders pattern. A significant break may occur if the index closes below 43796, as Wednesday’s trading volume indicated substantial distribution. The Bollinger Bands have contracted further, suggesting an impending downside impulse move. The index also faced resistance at the 20 DMA and formed an exceptionally bearish candle on Wednesday.

A positive scenario only unfolds if the Bank Nifty moves above 44710, likely signaling a resumption of an upward trend. However, if it closes below the level of 43796, it could test the immediate support level of 43630. Overall, the trend is decidedly negative, and a confirmed downtrend may emerge shortly. It’s advisable to maintain a negative bias.

Bank Nifty – Strategy for the day

The Bank Nifty has formed a notably bearish candle. A move above 44000 is positive and could lead to a test of 44150, with a stop loss at 43930. Conversely, a move below 43880 is negative and may lead to a test of 43665, with a stop loss at 44000. If it falls below 43665, 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.