Sumeet Bagadia, Executive Director at Choice Broking said traders can adopt 'Sell on rise' strategy for Nifty Bank this week, as the index is sending strong bearish signals on the weekly chart. If the Nifty Bank moves upward this week, PSU banks are likely to perform well, with key stocks like Bank of Baroda (BOB) and State Bank of India (SBI) being two top picks, Bagadia said.
Bagadia said Nifty Bank breached its recent low and touched 50,194.30 level last week. But the index managed to stage a pullback, settling above the 51,000-mark last week, indicating a consolidation.
"Additionally, the index has formed a small body with a long lower wick candle on the weekly chart, suggesting a brief pullback from the lower levels. This convergence of candlestick patterns indicates a "sell on rise" trend, implying that any upward movement may encounter resistance and lead to further selling pressure," Bagadia said.
The analyst said the index may target 50,500, followed by 49,700 on the downside. Traders may maintain a "sell on rise" strategy until the index consistently stays below the 52,000 level, Bagadia said.
"Furthermore, on the weekly timeframe, Bank Nifty has closed near its short-term (20-day) Exponential Moving Average (EMA). A breach below this level could lead to further downside, testing the medium-term (50-day) EMA levels. The Relative Strength Index (RSI) is currently at 52.94, showing a recent decline, indicating weakening strength," he said.
Meanwhile, the Moving Average Convergence Divergence (MACD) has shown a negative crossover at overbought levels, further signaling bearishness in the market. Looking ahead, the index may face significant resistance near the 52,000-52,500 levels, he said.
"For the ongoing expiry, Bank Nifty's put options have the highest concentration near 51,000 and 50,500, suggesting these levels as potential supports. Conversely, call strikes at 51,500 and 52,000 showed significant open interest concentrations, indicating possible resistance levels, which suggest a range of 50,500-52,000 for the weekly expiry. Traders are advised to be cautious and maintain strict stop-loss levels," Bagadia said.
He said one can avoid carrying any long positions overnight to mitigate potential risks from market volatility.