Bank Nifty forms bearish candle; level 21,000 becomes crucial

The banking benchmark index-Bank Nifty had started the last trading session of the week on a positive note but failed to sustain above 22,300 level.

It corrected from the higher levels and drifted towards 21,500 level in the second half of the session. However, a minor recovery was seen from the lower levels and the index finally settled the day with a loss of 2.33 per cent at 21,679.40 level.

The price action of the day formed a sizeable bear candle. This bearish candle formation has come along with a rise in the daily range. Friday’s trading range was about 875.85 points whereas; the 10-day average daily range is 399.45 points. The bulk of the losses were registered in the second half of the day.

The leading indicator, 14-period daily RSI, is currently quoting at 47.47 and is trading below its 9-day average. The stochastic has also given a bearish crossover. Further, the directional index has given a negative signal as –DI has crossed above +DI line.

For further correction, the level of 21,000 is crucial for the index as earlier, on two instances, Bank Nifty has taken support near this level. Firstly, on July 16, when the index had formed a hammer-like candlestick pattern and thereafter, witnessed a bounce of nearly 2,200 points in five trading sessions. Secondly, on August 3, when it had formed a bearish candle and thereafter, witnessed a bounce up to the level of 22,439.95.

Overall, keep a close watch on the level of 21,000 as a decisive move below this level would give further power to the bears.

The derivatives data suggest that among Bank Nifty Calls, the 22,000 strike price is the most active call for August 20, 2020, weekly expiry. Among Bank Nifty puts, 22,000 strike price is the most active put for August 20, 2020, weekly expiry. For August 20, 2020, weekly expiry, open interest wise put-call ratio (PCR) is at 0.69 and for August monthly series, PCR is at 0.86.

For August 20, 2020, weekly expiry, the highest call open interest is at 22,500 strike with 6,97,325 OI. On the put side, 20,500 strike has 4,07,525 open interest, which is the highest. For August 20, 2020, weekly expiry, the total call open interest is 60,98,475 and the put open interest is 41,89,725. For August monthly series, the highest call open interest is at 23,000 strikes with 4,19,650 OI, followed by 22,500 strikes with 3,80,950 OI. On the put side, the highest put open interest is at 20,000 strikes with 4,47,275 OI. The current derivative data suggest that the Max Pain is at 21,900 for the monthly expiry.