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Bank Nifty’s fall continues today too. After opening lower at 42,708.40 today, versus yesterday’s close at 42,832, the index dropped further. It is currently at 42,350, down 1.1 per cent.
Reinforcing the overall bearish bias, the advance/decline ratio of the index stands at 1/11. Axis Bank, up nearly 1 per cent, is the only gainer. Bank of Baroda and Bandhan Bank, down 2.4 per cent each, are the top losers.
Although both public and private sector banks are largely facing downward pressure, the losses in private banks appear comparatively lower. Nifty Private Bank index has lost 1.1 per cent whereas Nifty PSU Bank index has depreciated 2.3 per cent after the initial hour of trade.
Bank Nifty has more room to fall as the double-top pattern on the daily chart hints at a fall to 41,150. But note that today the October monthly contracts expire. On expiry days we could see above-average volatility.
Bank Nifty futures
Bank Nifty futures (October expiry) began today’s session with a gap-down at 42,730 versus Wednesday’s close of 42,811.55. It is currently trading at around 42,330, down 1.1 per cent.
The 14-day ATR (average true range) for Bank Nifty futures is around 450 points. Thus, compared to yesterday’s close of 42,811.55, the potential lower limit — an intraday support — comes at around 42,360.
The contract has already fallen beyond this, as it is currently trading at around 42,330. While ATR does not guarantee a rebound, taking fresh short positions at the current level carries higher risk.
Nevertheless, it is worthwhile to note the key levels. The nearest support can be seen at 42,200 and 42,000. On the other hand, the immediate resistance is at 42,750 and 43,000.
Trading strategy
Although the trend is bearish and the underlying Bank Nifty index hints at further fall, it may not happen today. Also, the risk-reward for fresh short positions is unfavourable at the moment. Therefore, we recommend staying out.
Supports: 42,200 and 42,000
Resistance: 42,750 and 43,000
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