Bank Nifty forms shooting star-like pattern; zone of 22,000-21,840 is crucial for downside

The banking benchmark index, Bank Nifty started its day with a minor upside gap and thereafter, gradually moved in the northward direction.

At one point in time, Bank Nifty crossed its important psychological mark of 23,000 and registered a swing high of 23,080.60. However, in the second half of the trading session, the index came off almost 500 points from the highest point of the day and slipped into negative territory. Finally, it closed at 22,584.65, down by 0.19 per cent.

The price action formed a long upper shadow and a small real body, which closed near the bottom end of the trading range. Meanwhile, in Japanese, the candlestick parlance is known as the shooting star pattern. The shooting star’s long upper shadow reflects the market rejection of higher prices. The shooting star pattern is not exactly according to the textbook rules as it has a minor shadow on the lower side of the candle. Further, the index has formed this bearish pattern near the upper trendline of the rising wedge pattern.

The above evidence clearly indicates that the zone of 23,050-23,200 is stiff resistance for the index and hence, only sustaining and closing above this zone, would result in further advancement. Meanwhile, on the downside, the zone of 22,000-21,840 is a crucial support for the index as it is the confluence of lower trendline of rising wedge pattern and short-term 13-day EMA level.

The derivatives data suggest that among Bank Nifty Calls, the 23,000 strike price is the most active call for July 09, 2020 weekly expiry. Among Bank Nifty puts, 22,500 strike price is the most active put for July 09, 2020 weekly expiry. For July 09, 2020 weekly expiry, open interest wise put-call ratio (PCR) is at 1.03. For July monthly series, PCR is at 0.87.

For July 09, 2020 weekly expiry, the highest call open interest is at 23,000 strikes with 8,06,340 OI. On the put side, 22,000 strike has 9,16,800 open interest, which is the highest. For July 09, 2020 weekly expiry, the total call open interest is 58,33,780 and the put open interest is 57,91,700. For July monthly series, the highest call open interest is at 23,000 strikes with 4,22,100 OI. On the put side, the highest put open interest is at 21,500 strikes with 2,89,825 OI. The current derivative data suggest that the Max Pain is at 22,000 for the monthly expiry.