Bank Nifty forms Dark Cloud Cover pattern

The banking benchmark index, Bank Nifty, opened the final trading session of the week on a positive note but it failed to show a follow-through move and tumbled down. As a result, it formed a sizeable bearish candle on the daily scale. The index has lost almost 604.55 points or 1.89 per cent since last Friday. Considering the weekly scale, the index has formed the Dark Cloud Cover candlestick pattern. The Dark Cloud Cover is a bearish reversal candlestick pattern, which usually occurs when a bearish candle is formed on the second day, which opens above previous days close and closes below the middle of the first day’s candle. The rejection of the gap up is a bearish sign itself but the retracement into the gains of the previous day's up move adds even more bearish sentiments.
 
With this bearish formation, the index has managed to close below its crucial short term moving average, that is, 13-day EMA after a span of almost 36 trading sessions. Among the momentum indicators, the 14-period daily RSI cooled off after touching 73 zones and, at present, its reading is 54.40. The RSI is trading below its 9-day average and it is in falling mode, which indicates a further downside momentum. The stochastic oscillator is also suggesting some bearish momentum, as %K is below the %D. Moreover, the daily MACD stays bearish, as it is trading below its zero line.
 
Going ahead, if the index slips below the previous week's low of 31,049.75 and trades convincingly below this level, then there is a high probability that the previous week's high point of 32,157.05 would become a temporary top for the index.
 
Derivatives data suggests that among Bank Nifty Calls, the 32,000 strike price of December 12, 2019, weekly expiry, is the most active call. Whereas, among the Bank Nifty Puts, 31,500 strike price of December 12, 2019, weekly expiry, is the most active Put. For the December 12, 2019, weekly series, the maximum open interest (OI) outstanding for Calls was at 32,000 strike price and that for Puts were at 31,000 strike price.