Bank Nifty forms piercing line candlestick pattern

The banking benchmark index, Bank Nifty has witnessed almost 11,261 points or 34.53 per cent downward move from the all-time level in 54 trading sessions. However, on Friday, the index has formed a piercing line candlestick pattern on the daily time frame. The piercing line candlestick pattern is considered to be a bullish reversal pattern and usually occurs at the bottom of a downtrend.

Among the momentum indicators, the 14-period daily RSI bounced after touching 12-15 zones and at present, its reading is 25.61. The RSI is trading above its nine-day average and it is in rising mode, which indicates a further upside momentum. The daily stochastic oscillator is also suggesting some bullish strength as per cent K is above the per cent D. Moreover, the positive divergence is clearly visible between daily stochastic and index price movement, which suggests limited downside.

Going ahead, if the index sustains above Friday’s session high of 25,670.75 and trades convincingly above this level then, there is a high probability that Friday’s lowest point of 21,351.70 would become a temporary bottom for the index. 

Derivatives data suggests that among Bank Nifty Calls, the 26,000-strike price of March 19, 2020 weekly expiry is the most active call. Whereas, among Bank Nifty Puts, 21,000-strike price of March 19, 2020 weekly expiry is the most active Put. For March 19, 2020 weekly series, the maximum open interest (OI) outstanding for Calls was at 27,000-strike price and for Puts, it was at 24,000-strike price.