The Nifty Bank index started August on the backfoot, extending its bearish tone from July and clocking its fifth consecutive weekly close below the previous week's high. The technical and derivative setup paints a gloomy picture, suggesting that bearish momentum is likely to persist unless a strong catalyst emerges. From a chartist’s lens, the structure is firmly negative, with lower highs, weakening RSI, and persistent rejection at the 50-day EMA serving as red flags for bulls.
Price Action: Lower Highs, Lower Lows – A Classic Bearish Signature
Nifty Bank ended the week with a 344.35-point decline, closing at 55,617.60, alarmingly close to the crucial support zone of 55,500–55,700. This region has historically acted as a demand zone, often triggering sharp reversals. However, this time around, there are no clear signs of a bullish reversal, with the index continuing to trade under key moving averages.
The price structure is deteriorating, marked by a steady series of lower highs and lower lows, a textbook indicator of bearish dominance. Unless this trend is broken with strong volumes and breadth, the outlook remains negative.
Technical Indicators: Weak RSI and 50-DEMA Rejection
The 50-day exponential moving average (50-DEMA) has become a strong ceiling, with the index being consistently rejected from that level during minor rallies. The resistance band of 56,800–57,000 has turned into a major supply zone.
Meanwhile, the Relative Strength Index (RSI) has dropped below the 40-mark, which historically aligns with bearish phases in the index. This confirms a lack of bullish momentum and growing internal weakness.
“A breakdown below the 55,500 zone could trigger a fresh wave of selling, with downside targets near 55,000–54,900 in sight.”
Derivatives Snapshot: Option Writers Show No Confidence
The F&O data reflects a cautious and bearish sentiment. Here's a closer look:
- Call writing at 57,000 has intensified, with open interest (OI) climbing to 20.91 lakh contracts, forming a strong resistance cap.
- On the downside, put writers are stationed at 55,000, which currently holds the highest put OI at 8.12 lakh contracts, making it a key near-term support.
- However, a shift in put writing to lower strikes indicates waning bullish conviction.
- The Put-Call Ratio (PCR) hovers around 0.86, reinforcing the dominant call-side buildup and limited room for upside rallies.
Market Sentiment: Pessimism Deepens, FPIs Hold the Key
The broader market sentiment for Bank Nifty is clearly bearish. With each bounce getting sold into, the probability of meaningful upside remains low. Even in the derivatives segment, call writers are aggressively defending higher levels, showing no fear of sharp upside reversals.
The FPI (Foreign Portfolio Investors) long-short ratio suggests that the market is nearing oversold territory, but there's no evidence yet of short-covering or fresh long build-up. Unless FPIs unwind their short index futures and resume cash-market inflows, the overhead supply will keep the index under pressure.
Outlook: Sell on Rallies Until Structure Changes
In the absence of a bullish catalyst or a sharp short-covering rally, any bounce in Bank Nifty is likely to face resistance and fade quickly. The technical structure and derivatives data both point toward continued weakness, and the index remains vulnerable to fresh breakdowns.
Strategy for Traders:
- Positional traders: Use rallies toward 56,800–57,000 to create short positions with strict stop losses.
- Intraday traders: Watch 55,500–55,000 as a critical zone. A breakdown could open quick downside opportunities.
Conclusion
The Nifty Bank index remains deeply entrenched in a bearish phase, with weakening momentum, rejection from key moving averages, and no bullish divergence in sight. Until FPIs start covering shorts and a broader sentiment shift emerges, any upward move will be short-lived. For now, the trend remains "sell on rise" unless the index breaks above its critical resistance zones with conviction.
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