Banknifty Takes Breather with Bearish Belt Hold Formation

The Banknifty ended Friday's session with a loss of 0.36% and on the weekly chart it has formed a candlestick pattern which resembles to a bearish belt hold pattern. The bearish belt hold pattern formation was owing to Monday's open=high and thereafter, the price action remained capped for entire week within the high and low of Monday's session. 

On the weekly scale, Banknifty has formed higher high and higher low, so the formation of bearish belt hold, after a three consecutive week of gains could be see as a temporary breather. Meanwhile, the index is trading comfortably above the 20WMA. 

On the daily chart, the index breached it's immediate support of 5EMA on intraday basis, but recovery from lower levels helped index to close above the 5EMA. With this, it has taken support at 5EMA for the last three days. Technically, the index is showing a short-term top. Only above the level of 42604, it is likely to resume the uptrend. But, if it closes below the level of 42096, it will be negative. On an hourly chart, the index has closed below the moving average ribbon along with the MACD line below the zero line and signal line, which is short-term negative. The daily RSI is showing a downward move in the strong bullish zone. The MACD histogram also shows a decline in bullish momentum. The Stochastic oscillator has already given a sell signal in an extremely overbought condition. In any case, if the index declines below the Monday low of 41799, it will be negative. The Anchored VWAP of 41523 will act as immediate support. Below this, it can test 40911, which is 20DMA and sloping trendline support. For now, stay cautious on the long side. 

Strategy for the day 

The Banknifty took support at the level of 42050 on a sharp decline on Friday. A move above the level of 42126 is positive, and it can test the level of 42330. Maintain a stop loss at the level of 42050. Above the level of 42490, continue with a trailing stop loss. But, a move below the level of 42050 is negative, and it can test the level of 41855. Maintain a stop loss at the level of 42126. Below the level of 41855, continue with a trailing stop loss.