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The Bank Nifty (21,175) opened with a gap-up on Tuesday in line with bellwether indices. The index breached the key immediate resistance level of 21,000 on that session.
After recording a new high at 21,336 on Friday, the index started to decline and formed a bearish engulfing candlestick pattern on the daily chart.
With the prevailing volatility, the index has formed a spinning top candlestick pattern in the weekly chart, implying indecisiveness. For the week, the index gained 447 points or 2 per cent. The indicators and oscillators in the daily chart continue to show weakness, signifying trend reversal is on the cards. As long as the index manages to trade above the immediate support level of 21,060, the near-term bullish momentum could remain intact.
A plunge below the key near-term support band between 21,000 and 21,060 will renew selling interest as well as profit taking and pull the index lower to 20,700 and 20,500 in the short term.
Traders with a short-term view should yet again tread with caution as long as the index trades in the immediate base zone of 21,000 and 21,060. Investors can hold their long positions with a stop-loss at 21,000. Resumption of the uptrend can take the index higher to 21,400 and then to 21,500 in the near term.
On the other hand, a strong tumble below the key medium-term support level of 20,500 could bring back bearish momentum and pull the Bank Nifty lower to 20,370 and then to 20,150 or 20,000 in the short term.
Since the December low of 17,606, the Bank Nifty has been on a medium-term uptrend. This medium-term uptrend will remain in place as long as the index trades above 19,000 levels.
A conclusive fall below 20,000 will weaken the short-term uptrend. If that happens, the index may decline to test the subsequent support levels at 19,700 and 19,500.
Nifty IT IndexLast week, the IT index also advanced, breaching a key resistance level of 10,800 and gaining 1.4 per cent to close at 10,900.7. It has been on a medium-term uptrend since taking support at around 9,400 in November 2016.
While trending up, the index emphatically breached a significant resistance level of 10,400 in mid-February and continued to trend upwards, surpassing the 200-day moving average.
The indicators in the daily chart have re-entered the bullish zone backing the uptrend. Short-term outlook is bullish for the index. It can extend its rally and test resistances at 11,000 and 11,200 levels.
Key supports to note are placed at 10,800 and 10,600. Only a plunge below 10,600 will weaken the short-term uptrend and pull the index down to 10,400 levels.
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