Postmortem on Bank Nifty - 22 AUG 2022

Bank nifty opened right at the support level of 38700 gap down to the previous day. The first 2 candles were strongly bearish which had set the tone for the day. I was hoping for further fall, but BN consolidated in the price range of 38450 & 38250 - knocking the upper & bottom band multiple times but not convincingly breaking them.

BN tried to make a small pull back from 11.45 to 12.30, but it did not sustain. Observing the option prices today, the out of the money call options (CE), rallied and even traded well above last working day's high - for me it seems there is heavy call writing at ATM and near ATM levels which ends up boosting the prices of OTM CEs as they are used for hedged margin benefits.

The heavy call writing indicates that market participants are not expecting a bullish move by BN for this expiry. If the global trends continue to weaken - we will have a good scenario. If for any reason the global macros turns better - we might have a heavy short covering rally. I am of the opinion that the bearish momentum may continue till this expiry.

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5mts chart for the previous days, shows the uptrend pattern reversal. 2 supports are broken already.

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1hr chart pattern shows an interim top formation. If the support resistance lines are considered - we can even consider it as a triple top (but its not a technical 3top as there were contradicting price actions in between)

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If we look at the nifty50 daily chart we can see the price (yellow circled) falling below the declining top trend line (green color). If further trades are happening below this falling channel the we can expect sharp corrections to the lower channel.

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Bank nifty important support and resistance lines

s1: 37949, s2: 37254

r1: 38699, r2: 39330

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