Banking stocks are the most uncertain trades during this week. Bank nifty fell from 19100 to 18650 the most abrupt decline since beginning of the month. Finance sector is leading the pessimistic sentiment as Canara bank lost 2.63%, Union Bank lost 2.23% and Karur Vysya bank lost 2.28% so far. Lower than expected first quarter earnings have made investors cautious. Position adjustment caused price action to retrace earlier gains. Bank Nifty is currently trading at 18632.50.
4h chart of Bank Nifty for price action trading
1. Overall the long-term trend (spanning from months to years) is still upside. My focus is on Swing trading and short-term trading, so it’s better to observe 4h chart. Prices were trading within range from June to July between 18000 – 17400. Through constant analysis we can find that characters of range are similar to Accumulation zone.
2. We see a sharp gap down below the support 17400 and prices rebounding back to the range again. Price action traders refer to this pattern as Rejection. This pattern is a trademark of Richard Wyckoff analysis. Traders can notice the strength of buying pressure through this pattern. If you’re trading support and resistance, it’s better to place your stops by taking these possibilities into consideration.
3. Pre-breakout test at Resistance 18000 (notice that it’s also a round number) gave a hint about selling pressure. Resulting behavior we see only small candlesticks indicating that sellers have lost control within the range.
4. Bank nifty rallied from 18000 to 19100 before retracing due to position adjustments and disappointing Q1 earnings reports. Retracement is another kind of retest where market prices shed off earlier gains. The process will shakeout weak hand players. Traders should asses the buying pressure around support levels to determine the market direction.
