Bank Nifty gives breakdown of Rising wedge pattern

The Banking benchmark index, Bank Nifty, has saw one of the most horrible days of the recent past as it tumbled over 2.5 per cent. The price action has formed a sizeable bearish candle, carrying a lower low-high. With this, the index has given breakdown of Rising Wedge pattern on daily timeframe. The Rising Wedge is a bearish pattern that begins wide at the bottom and contracts as prices move higher and the trading range narrows.

On Monday, the index has managed to close below its weekly pivot and short term moving averages, that is, 20-day EMA and 50-day EMA. The leading indicator, 14-period RSI, is currently quoting at 40.90 and it has moved below its recent swing low, which is bearish. The daily MACD stays bearish as it is trading below its zero line. Moreover, there has been a negative divergence between the daily RSI, daily stochastic and the index price movement, which suggests limited upside.

In case Bank Nifty sustains below the level 30,996, it would invite further selling and index may test November months low of 30,013.65. On the other hand, it is advisable to wait till the Bank Nifty moves above the 32,330 mark to create any short-term long positions in the index.

On the options front, among Bank Nifty calls, 32,000 strike price of the January 09, 2020, weekly expiry is the most active call. Whereas, among Bank Nifty puts, 31,000 strike price of the January 09, 2020, weekly expiry is the most active put. For the January 09, 2020, weekly series, the maximum OI outstanding for calls were at 32,000 strike price and that for puts was at 31,000 strike price.