The Bank Nifty index has declined sharply, breaking below support at 51,000. This is contrary to our expectation that the index would sustain above 51,000. As such, our bullish view mentioned yesterday has gone wrong.
The index is currently trading at 50,560, down 1.9 per cent. The advances/declines ratio is 2:10, which clearly indicates a negative bias.
Bank Nifty outlook
Support is in the 50,400-50,300 region and can be tested during the day. The price action thereafter will need a close watch. If the index manages to bounce from this support zone, then a recovery towards 50,700-50,800 is a possibility.
But a break below 50,300 will be bearish to see an extended fall to 50,000-49,800.
The price action in the 50,400-50,300 region will need a close watch.
Bank Nifty Futures
The Bank Nifty October Futures (50,610) is down about 1.9 per cent. The contract has room for a fall to 50,300 – the next key intraday support.
If the contract bounces from this support, recovery rises to 50,700, and higher levels are possible.
But a break below 50,300 can drag the contract down to 49,800.
We will have to wait and watch to see what happens to the support at 50,300.
Trade Strategy
Traders can go short now at 50,610. Keep the stop-loss at 50,720. Trail the stop-loss down to 50,570 when the contract falls to 50,520. Move the stop-loss further down to 50,510 when the contract falls to 50,460. Exit the shorts at 50,370
Supports: 50,300, 49,800
Resistances: 50,700, 51,000
