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New lows possible in Bank Nifty

, February 12, 2014, 0 Comments

India’s growth has been hampered due to various reasons which has resulted in a forecast that GDP is likely to grow 4.86% for the financial FY14. Removing 26% interest rate cap on loans given by micro-finance companies, linking cost of funds to interest rate are some of the RBI steps that acknowledges the distress state of the banking system. These steps would help NBFCS and micro-finance company to tackle their NPA more effectively, which in the long run would have the necessary positive effect on the recovery and growth of the economy.

Invest Or Not To Invest: A trader may invest/trade with an adequate stop loss and trailing stop loss. With RSI at 40 one may buy Bank Nifty with stop loss below 10100.Actively short below 9900 with stop loss of 9950. Strict trade entry point can help save capital and big swings on either side on Bank Nifty.

Chart Structure: In daily time frame Bank, Nifty structure collapsed from uptrend channel making a high of 13400 within the uptrend channel. With the bullish structure collapsing, Bank Nifty made yearly low of 8392  & then, this led to a pull back at 12200. Technically, the trend is sideways but seemed more biased towards bearishness for the short term.

Price Pattern:  Bank Nifty is stuck in a sideways contracting between the ranges of 9900-11000 on the upside, a free fall in the range of 9900-8300 on the down side. Except for small modulated up moves and down moves, no price pattern is observed.

bank nifty new low possible-MarketExpressMoving Average:  Bank Nifty has fallen from 2 broader trend – moving average 50dma & 200dma. Any upward trend will act as a stiff resistance to Bank Nifty. 200dma is a very significant long term trend indicator & fall below it hints, a bearishness trend in the bank sector.

Technical Momentum Indicator:  RSI is currently at 40 after having touched 80. Price and indicator are in sync with each other. As price moves up, RSI touches 80 that is within an overbought upper band and when the   price fall,  RSI touches 40 that comes under  an oversold lower band. RSI at 40 indicate is an excellent entry point for a long trade while RSI at 80 an excellent entry point for a short trade.

Technically sideways structure is observed in Bank Nifty, daily time frame. In the daily time frame, bullish and bearish phase of 3000 points is indicated. Scaling 200dma on the upside, it will be a big challenge for Bank Nifty bulls. Till it happens, every rally will be sold into and new lows may be a possibility in Bank Nifty.

 

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