Everyone would have expected bank nifty to go up today esp when S&P500 and Nasdaq100 closed 1.97% up yesterday.
The gap up opening of 38092 above the resistance line of 37946 shows the level of expectations, but the big-boys had other plans. Check the volume on call option shorts yesterday - see here. The short side positioning was so heavy that bank nifty was unable to rise.
These positions could be monthly expiry specific and nothing to do with the global trend/direction. Maybe tomorrow bank nifty could trade quite contradictory to the one today - this is one reason i did not carry forward any positions for tomorrow. Also its the RBI interest rate decision on 30th Sep.
If the RBI decides to hike the rates, its very good for the banks as they get higher yield for the loans. But its not positive for all the other companies that are borrowers. Also the market participants like the traders, investors, speculators would love to park their money in risk free GOI bonds vs stocks if the 10Y yield rises above 8%.
So bank nifty might be stuck in a specific dilemma whether to outperform the nifty index or stay with it. Nobody can predict with accuracy - lets find out tomorrow from the RBI Governor at 10AM IST.
Looking at the trades today the 37946 support line held at 10.00 AM, made a candle stick pattern indicating bullishness - but what followed was not uptrend. The green candle at 10.50 was taken out by the red one at 11.00 and the support line was also taken out in the next 10mts.
Once the support was crossed, bank nifty did not attempt to rally back, in fact it broke yesterday's swing low but did not fall further. BN took support even before 37247 level which was quite a surprise for me.
The bank nifty vs S&P500 still shows massive outperformance. While SPX has retested the 2022 lows, bank nifty is still quite a long way to go.
The 5mts chart - shows a steady downfall
1hr TF also shows bearishness
Bank nifty important support and resistance lines
s1:37247, s2: 36559
r1: 37946, r2: 38698
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