The front-line NIFTY50 index experienced a sharp break after eight weeks of strong consolidation. It has marked a new high life and is currently being traded in unfamiliar territory.
For a bullfight to be maintained in a meaningful way, there must be broad participation; especially from key sectors such as banking and finance. However, it is seen that one of the key indices, NIFTYBANK (more popularly called Banknifty), has outperformed NIFTY on a relative note.
The current technical configuration suggests that this key index is likely to recover in the event that markets consolidate and maintain current gains.
When compared to the broader NIFTY500 index, the NIFTYBank index shows a strong improvement in its relative momentum and is about to enter the improvement quadrant. If the current momentum improvement is maintained and if the index enters the improvement quadrant, it would mean an end to the relatively low performance of that index.
Analysis of the daily chart shows that the NIFTY bank index is far from its high point of 37708. The recent price action shows that the index is consolidating in a sideways trajectory and is on the verge of a break.
The MACD is bullish and is above the signal line. The PPO remains positive. It is seen that the RSI comes out of a pattern resistance before the actual burst.
If the current strength in the general market is maintained, there is more chance that the current pattern will be resolved with an upward break. In this case, the possibility of Banknifty proving its previous high point cannot be ruled out. This would also mean that the breakdown, if all that happens, will also lead to significant movement in key NIFTY Bank components such as HDFCBANK, ICICIBANK, SBIN and KOTAKBANK.
Milan Vaishnav, CMT, MSTA
Consulting technical analyst
www.EquityResearch.asia | http://www.ChartWizard.ae
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