Bank Nifty: Applying Bollinger Bands® and Channels on monthly charts

Bank Nifty is a very important leading indicator for Equity markets. Channels and Bollinger Bands provide lot of clues to the ongoing trend along with important reversal areas.

The below chart of Bank Nifty was published in previous months research report – “The Financial Waves Monthly update”. Prices have continued to behave as expected and are still contained within the bands. Elliott wave counts are purposely removed and is shown in the actual research reports.

Figure 5: Bank Nifty monthly chart

Post forming a low at 13400 level Bank Nifty has continued to move higher protecting the important support on downside and as of now trading at the high of 2016. The recent breakout on upside in Nifty after the month long consolidation and outperformance of Bank Nifty is creating euphoria and understanding the overall trend as per Elliott wave theory is required.

Bollinger Bands: During the range bound market, Bollinger Bands work well. We can see that prices are now close to the upper Bollinger Bands. As per this resistance of the same is placed at 20600 level. So it will be crucial to see if prices take halt near the same level or not over medium term.

Monthly bar technique: as the rally is corrective in nature, one should use other techniques like monthly bar technique to be in the trend. From last 6 months prices have been protecting the low of prior bar on closing basis. This is simple but very important tool to ride the trend. As per this, low of 18440 should act as important support and as long as this level is intact one should avoid catching a top.

The daily chart shows that prices have been moving higher in channelized manner which is why the entire up move is ………. As of now there are no exhaustion signs and it is better to follow the trend….

By adding detailed Elliott wave counts to the above chart the entire pattern suddenly becomes all the more appealing.

“The Financial Waves monthly update” is published every month providing medium to long term outlook on Nifty, sub-Indices, stocks, Global markets and much more. Contact US to get your copy of the research report now.

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