Bank Nifty signals indecision; forms Inside Bar pattern

Bank Nifty, the banking benchmark index, traded in a narrow range of 1,318.40 points during the week.

The index had ended the week with a modest gain of 260.35 points or 1.20 per cent and formed an Inside day candlestick pattern after spinning top candle on the weekly time frame, which suggests indecision among the traders. The Inside day is that candle when the day’s range, that is the high and low, was within the range of the previous day.

Currently, the index is trading above its weekly pivot and short-term moving averages, i.e. 20-day EMA and 50-day EMA. However, the leading indicator, 14-period RSI, hovers on the daily timeframe in the neutral region without any bias and the daily ADX is trading below 15. This indicates the lack of a clear trend. Meanwhile, other indicators are also mirroring the same image.

Since the last eight trading sessions, the 100-day EMA is acting as a strong resistance for the index. It’s important to note that confidence can be installed in traders only if it closes above 100-day EMA, which is currently quoting at 22,450 level. On the flip side, the level of 21,050-20,900 will act as immediate support for the index as it is the confluence of 50 per cent Fibonacci retracement level of its recent upward move (19,507.05-22,479.55) as well as 50-day EMA level.

All-in-all, Bank Nifty at present, is trading in the range of 22,500-20,900. A move above or below this level, could give the traders an opportunity to take a directional bet or else, buy on support and sell on the resistance is the best strategy for traders in this environment.

The derivatives data suggest that among Bank Nifty Calls, the 22,500 strike price is the most active call for July 09, 2020 weekly expiry. Among Bank Nifty puts, 21,500 strike price is the most active put for July 09, 2020 weekly expiry. For July 09, 2020 weekly expiry, open interest wise put-call ratio (PCR) is at 0.75 and for July monthly series, PCR is at 0.82.

For July 09, 2020 weekly expiry, the highest call open interest is at 23,000 strike with 7,52,380 OI. On the put side, 21,000 strike has 6,06,480 open interest, which is the highest. For July 09, 2020 weekly expiry, the total call open interest is 49,07,040 and the put open interest is 36,69,800. For July monthly series, the highest call open interest is at 23,000 strikes with 5,05,850 OI, followed by 22,000 strikes with 2,95,050 OI. On the put side, the highest put open interest is at 20,000 strikes with 3,45,425 OI. The current derivative data suggest that the Max Pain is at 21,500 for the monthly expiry.