Technical Analysis

Bank Nifty faces key hurdle

YOGANAND D | Updated on January 24, 2018 Published on May 31, 2015

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The CNX Bank Index, known as Bank Nifty, and the CNX IT Index moved in opposite directions last week. While the Bank Nifty advanced 1.6 per cent to close at 18,721.3, the CNX IT Index fell 1.3 per cent to 11,575.

The RBI’s monetary policy in the week ahead will be a highlight for the Bank Nifty. A further rate cut can trigger fresh buying and take the index northwards. Any disappointment can pull the index lower. The rupee has been testing the 64-mark over the past one month. A decisive break of this level can weaken the currency. This movement of the rupee can induce fresh buying in IT stocks, in turn pushing the representative index higher.

Bank Nifty (18,721.3)

Both the long and intermediate-term trends are up for the index. However, after marking a new high of 20,907.5 level this January, the Bank Nifty has been on a medium-term downtrend. In early May, the index took support from its 200-day moving average at around 17,500 and bounced up.

It hovers just above its 21- and 50-day moving averages. The indicators and oscillators on the daily chart are trending upwards. But the index faces a key trend-deciding resistance ahead in the band between 19,000 and 19,100. The 50 per cent Fibonacci retracement level of the prior up-move also coincides in this band.

An emphatic breakthrough of this resistance band will have a bullish implications and push the index northwards to 19,500 and then to 20,000 in the short to medium term. Next key resistances are placed at 20,500 and 21,000 levels.

However, inability to break the key resistance band between 19,000 and 19,100 can pull the index down to 18,000 levels initially and then to 17,500. Subsequent supports are placed at 16,600 and 16,250 levels. The key near-term resistance level is placed at 19,000 and support is at 18,300 levels.

CNX IT (11,575)

Since bottoming out at the April 2013 low of 5,960, the CNX IT index has been on a long-term uptrend. Nevertheless, the index reversed direction triggered by negative divergence after recording a new high at 12,908 in March 2015.

The index has been on a medium-term downtrend since then. But the presence of significant support zone between 10,900 and 11,000 provided base for the index in early May.

The medium-term trend will remain down as long as the index trades below the key resistance level of 11,900. But even before this level, the index faces an immediate resistance at 11,700 levels.

Strong rally beyond 11,900 will alter the downtrend and take the index northwards to 12,200 and then to 12,450 in the medium term. After this level, the index has significant resistance between 12,800 and 12,900 levels.

On the other hand, any declines can find support at 11,360 and then in the zone between 10,900 and 11,000. A conclusive breach of this support zone will reinforce the bearish momentum and drag the index down to 10,600 and 10,400. Further decisive fall below 10,400 will pull the index to 9,800 and then to 9,400 in the coming months.

Published on May 31, 2015
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