This past week, Nifty Bank made a high of 42,015.65, before closing the week at 41,499.70, up 2.86 per cent. The banking index established a Piercing pattern on the weekly chart.
On the daily chart, sustaining above 100-EMA would be acting as a important support for Nifty Bank. The index has shown a sharp upside movement from 39,800 levels in last two days. Momentum indicators such as RSI and MACD are currently skewed on the positive side. Among private banks, we expect ICICI Bank and Axis Bank would be a frontrunners. Among PSU banks, SBI Bank of Baroda may see some expansion in the coming week.
Nifty Bank February futures traded with 185 points premium. In the case of options, Nifty Bank Put option distribution shows that the 40,000 strike has the highest open interest (OI) concentration, which may act as support for the current expiry.
Nifty Bank Call strike of 43,000, followed by 42,500, witnessed significant OI concentrations and may act as resistance for the current expiry.
As far as technical parameters go, Nifty Bank is trading in broadening channel since the middle of December; it would catch up the directional movement once it sustains above the 43,100 level.
A strong base is placed around the 39,000 level. As the index maintains 42,200, the momentum will be skewed to the upside. Traders and investors should keep booking small profits with trailing stop losses.
The Nifty PSU index remained under pressure due a sharp selloff in the previous week. Keep an eye on the 4,060 level, which can be taken out this week. One should invest in quality banking equities for medium to long term gains
(The author of this article is Executive Director at Choice Broking)
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