Bank Nifty: A quick pull backBanking sector saw some heavy selling this week, but it shouldn't come to us as a big surprise as most banks have been trading at very high prices, and more importantly, perilously close to their respective supply zones. BankNifty took the toll for obvious reasons, after a long struggle to cross the 41600 level, price was finally pulled down from deep inside the supply zone.
Index has dropped by almost 5% within a week, and as a result, we have just hit a recently created demand zone. This is the first retest of this demand zone since it was created, and we saw a very good rejection today where price easily sustained above the zone. I'm expecting the price to at least temporarily retract from these levels, which makes for a very affordable & low-risk long position for the coming week.
Rationale:
- A fresh demand zone being re-tested, rejection with good volume.
- Price has taken support at .786 fib-level.
- Price has broken through 14-period ATR range on 30 Min and other smaller TFs.
- RSI & Stochastic ascending on 1H and smaller TFs.
- ADX indicating a loss of strength in the down trend.
Final Note:
- This is supposed to be a quick trade, max 3 days(do not wait until the weekly expiry).
- Exit criteria, either of the following, which ever happens first.
>> - Target achieved
>> - Stop loss reached
>> - End of 3rd day of the trade
- Do not go big, as this is a trade against the trend, but risk to reward is very good on this one(almost 1:5), so should it turn out positive, it'll be well-worth the wait.
