Bank Nifty forms bearish engulfing candle

The banking benchmark index, Bank Nifty, opened today’s trading session with an upside gap but failed to show a follow-through move and tumbled down.

As a result, it formed a bearish engulfing candlestick pattern on the daily scale. The bearish engulfing candlestick pattern is considered to be a bearish reversal pattern and usually occurs at the top of an uptrend.

Among the momentum indicators, the 14-period daily RSI has cooled off after touching the zone of 65 and at present, its reading is 57.28. The RSI is trading below its nine-day average and it is in a falling mode, which indicates further downside momentum. The daily stochastic is also suggesting some bearish strength as per cent K is below per cent D.

Moreover, Ichimoku chart on 30-minute timeframe is clearly giving a negative view as it closed below KS and TS lines. Another important aspect is that the KS line crossed under the TS line, which is also a bearish sign. 

Going ahead, if the index slips below Wednesday’s session low of 21,336.35 and trades convincingly below this level then, there is a high probability that Wednesday’s high point of 22,479.55 would become a temporary top for the index.

The derivatives data suggest that among Bank Nifty Calls, the 22,500 strike price is the most active call for June monthly expiry. Among Bank Nifty puts, 21,500 strike price is the most active put for June monthly expiry. For June monthly series, open interest wise put-call ratio (PCR) is at 0.73.

For June monthly expiry, highest call open interest is at 23,000 strike with 13,02,220 OI, followed by 22,500 strike with 11,41,320 OI. On the put side, 21,000 strike has 7,33,020 open interest, which is the highest. The highest change in open interest was seen at 21,000 put of June monthly expiry with 89,820 OI and on the call side, 22,500 call has seen the highest change in open interest with 6,50,060 OI. The total call open interest for June monthly series is 96,41,860 and the put open interest is 69,95,980. The current derivative data suggests that Max Pain is at 21,600 for the monthly expiry.