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Sensex (58650) / Nifty (17470)

Tuesday’s smart recovery was followed by a decent bump up at the opening yesterday and cheerful mood across the globe provided impetus for this head start. This gap up might have caught so many overnight traders on the wrong foot and hence, there was a complete gush seen in the initial hour to cover shorts. As a result, all key indices extended their relief rally and remained steady post the RBI monetary policy, which turned out to be a non-event.

Due to back to back two great sessions, our markets are off Monday’s low considerably. Point wise, Nifty recovered by nearly 600 points and for BANKNIFTY its whopping 1600 points. If we refer to our last couple of days’ commentary, this relief move was no surprise for us and despite we maintaining our directional cautious stance on the market, we managed to participate in this recovery to a great extent. Now from here on things may not be as easy as it was. We are now about to enter a cluster of resistance i.e. 17500 – 17600 – 17700. Market has closed on a strong note yesterday and hence, we may see further extension of this as well; but we still do not have the conviction of it moving beyond the higher boundary of 17700 in this leg. Let’s see how things shape up going ahead and if any such complete shift of sentiments has to happen, the banking space once again becomes the deciding factor. For the coming session, 17300 followed by 17200 are to be seen as immediate supports.

Although, individual stocks are providing excellent opportunity on the long side, now it’s time to apply some brakes on the aggressive approach and should ideally look to book timely profits in existing positions. Next couple of sessions would really be interesting to watch, because all key indices are now trading around the crucial levels.

Nifty Daily Chart

Nifty Bank Outlook - (37285)

On the policy day, Bank Nifty started with a gap up and although it didn’t see a major move post opening; it did maintain its positive stance in the remaining part of the day to eventually end with gains of 1.82% at 37285.

Bulls have sharply bounced back in the last two sessions from the key support of 200SMA. It has now managed to close the bearish gap left on 26th November and has also ended above the key average of 89EMA. With yesterday’s gap adjacent to the previous bearish gap we are witnessing a bullish formation known as ‘Island Reversal Gap’and going ahead as long the gap left yesterday around 36820 is defended one can expect this bounce to continue. In such scenario, next immediate resistance is seen around 37800 – 38000 zone. Ideally traders should continue focusing on stock specific trades however they need to be very selective as the low hanging fruits have gone.

Nifty Bank Daily Chart

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