Is Nifty Bank forming a short-term bottom and ready to breakout over 42K?

if the Bank index succeeds to close over 41,000 mark, which is right above its 21-DMA, the short-term upside may poised to rally towards 42,000 level,

In the last three sessions, Nifty Bank index has surged 2 per cent while benchmark indices, BSE Sensex and Nifty 50 merely managed to recoup their losses, by trading with muted gains. 

The broader scenario of the stock market shows that the BSE Sensex held on to the crucial support of 200-day moving average (DMA), but fell below Budget day low. In case of Nifty 50, the index breached both the 200-DMA and the Budget day low. However, Nifty Bank index firmly held the sell-off, by decisively holding both Budget day low and 200-DMA. 

Now, if the Bank index succeeds to close over 41,000 mark, which is right above its 21-DMA, the short-term upside may poised to rally further breaking major hurdle of 42,000 level, as per the index price analysis.

When this happens, banking stocks like Axis Bank, Bank of Baroda, Federal Bank, Punjab National Bank and State Bank of India may brace to conquer their previous major hurdles. 

Out of 12 stocks in Nifty bank index, over half stocks, in total 7 stocks are trading over the 200-DMA suggesting that the momentum continues to encounter bullish strength. 

According to the Fibonacci retracement levels, the 50% retracement of the all-time high of 44,151 to the recent low of 39,419 falls at 41,785-mark, which is the decisive level the bank index need to conquer to breakout on the upside. The index has managed to sustain over 23.60% placed at 40,536, indicating a move towards 41,227, its 38.20% retracement, which cannot be ruled out. 

On technical parameters, while the index is shaping “Lower High, Lower Low” formation on the daily chart, until the index holds over the previous low of 39,419, the pattern may not hold true. On the other hand, if the index succeeds to leap over 42,000-mark, the short covering may propel a sharp up move thereafter. 

The weekly trendline resistance also falls at 42,000-mark, thus indicating a major resistance. Technically, when two-three parameters mark a particular level, the significance becomes more rigid, as  is the case with banking index towards Rs 42,000 level. 

The immediate support for the index exists at 40,000 and only a definitive breakdown of this mark could alter the positive stance. At this moment, chart structure of Nifty Bank index shows a revival in a bullish trend, which may see further addition once the 41,000-mark is taken off.  CLICK HERE FOR THE CHART