Are you still bullish on Bank Nifty and PSU Banks? Is it time to be against the crowd?

In today’s trading session we have seen sharp reversal from the higher levels. 

Bank Nifty formed very strong negative divergence with Nifty as Nifty touched new highs near 8996 but Bank Nifty formed lower highs and lower lows. This is a precursor for trend reversal. Many traders see divergence on indicators but at times divergence on different indices are also crucial and provide vital information!

So is this the time to create fresh long positions or to Book your profits and stay out?

Below is a part of the research on Bank Nifty published today in our daily research report “The Financial Waves short term update”

Bank Nifty Daily chart:

Wave Analysis:

Bank Nifty is one of indices which have been leading the market since October 2014. Post the rate cut by RBI on 15^th January 2015, Bank Nifty continued the up move and touched the high of 20910 levels on 28^th January 2015. However on the same day some nervousness was seen at 20910 and prices lost the gain of entire day and closed on the negative note. This suggests us to take cautious stand as prices have been trading near the important resistance area which is explained below.

As shown in daily chart, since February 2014 prices have been moving in impulsive run. As per this wave structure, intermediate wave …. completed at ……… in the month of October 2014 and since then intermediate wave ??? is ongoing which is extended. We have shown big upward moving channel which is connecting the earlier high of 12000 and 16000 made in the month of December 2013 and June 2014. Within this, prices are intact in small red upward moving channel. The high made of 20910 on28^th January 2015 is exactly near the resistance of both this channel. Intersection of 2 channels provide the important resistance, hence one should be cautious now. As per candlestick technique prices have formed Doji candle which suggests stop in the current rally at least for short term. From medium term perspective, move below …… will suggest that medium term downside correction has started.

In addition to above we have also shown short term chart which helps in timing the market. Bank Nifty has given a sharp reversal on downside and it is not the time to create fresh long positions.So what should be trading strategy from here? To know subscribe to the daily research report“The Financial Waves short term update”. Visit the Pricing page on www.wavesstrategy.com for subscription options and see it yourself why we are at very important juncture!