HDFC Bank, ICICI Bank shares may drag Nifty Bank lower, says Sumeet Bagadia

Nifty Bank made a high of 44,936.55, before closing last week at 44,584.55 level, down 0.06 per cent. Nifty Bank has formed a ‘Doji’ candlestick pattern on the weekly chart, indicating indecisiveness among market participants. 

The banking index has failed to close above the support trendline on the weekly time frame and, hence, Nifty Bank can further correct towards the next support of 43,700-43,400 levels.

The RSI momentum indicator is currently trading around 54 level on weekly time frame. Nifty Bank has failed to close above its important short term (20-day) and medium term (50-day) EMA levels. If the index moves lower, we expect HDFC Bank to push some pressure on the index. Also,ICICI Bank can be another counter to drag the index lower. PSU banks are performing well and are expected to outperform with Punjab National Bank (PNB) PNB and Canara Bank expected to move higher and deliver a decent gains this week. 

The Nifty Bank October futures traded at a 262.30-point premium to the Nifty Bank spot. The open interest (OI) distribution for Nifty Bank Put options shows that the strikes of 44,500 and 44,000 have the highest concentration, which may act as support for the current expiry. Nifty Bank Call strikes of 45,000 and 45,500 saw significant OI concentrations and may act as resistance for the current expiry.

On weekly charts, one can witness a smaller resistance near 45,000 level, which is also close to 20-day EMA. If Nifty Bank sustains above the mentioned level, it can move higher towards 45,400 and above.  A strong support is located at 43,700-43,400 range. If the Index closes below the mentioned support, one can witness further correction.

(The author of this article is Executive Director at Choice Broking)

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