Inside bar formation on Bank Nifty - Is this the calm before the storm?

5paisa Research Team

Last Updated: 9th May 2023 - 11:29 am

On Monday, the Bank Nifty jumped nearly 1.5%.

With this strong up move the Bank Nifty managed to recoup some of the losses seen in the prior trading session. On the daily chart, the index has formed a bullish candle, but it has traded within the range of the prior trading session, hence, it is considered an inside bar formation.

Bank Nifty on Monday opened with a positive gap and traded mostly sideways after the first hour of trading. It mostly formed indecisive candles on the hourly chart, which reflected hesitation to move higher. The momentum has waned during the day. There are no bearish signs emerged now. But, the range of 42582-43740 has to be breached for a decisive trend to emerge. We may see some consolidation for another few days in this range. The volumes were lower today. The RSI struggled to move higher, even after about a 1.5% rally. The MACD line is about to move below the signal line. Histogram is almost at the zero line. The ADX and the +DMI lines are declining, showing the bull's grip is losing. It is better to wait for clarity on the trend. A move above Monday's high of 43419 is positive, and it can test the Thursday high of 43740. But, a move below the level of 43090 is negative, and it can decline to the lower range of the last three-day band.

Strategy for the day

The Bank Nifty traded mostly in the range after opening hour and on the daily time frame, it has formed an inside bar. A move above the level of 43419 is positive, and it can test the level of 43500 followed by 43740. Maintain a stop loss at 43260. But, a move below the level of 43260 is negative, and it can test the level of 43090 on the downside. Maintain a stop loss at the level of 43340. Below the level of 43090, continue with a trailing stop loss.

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