Bank Nifty shows breakout with bullish double bottom, poised to test 48,000

Equity benchmarks the Sensex and the Nifty closed the February 20 session near the day’s high, which was also close to their best ever performance. The Nifty was volatile through the day but managed to close the session at 22,196.

Bank Nifty, which has been under pressure since January after heavyweight HDFC Bank Q3 numbers disappointed the market, closed 500-point higher and closed the session above the 47,000 level for the first time in 35 days.

Technical charts show “buy” signals on Bank Nifty, which may soon climb up to 48,000, or even test its previous all-time high of 48,636.

After a period of relative underperformance compared to the frontline indices in recent months, the Bank Nifty index has stabilised around the 200-day EMA level. It has formed a Symmetrical Triangle pattern on the daily scale.

Put writers (bulls) squeezed call writers (bears) at the 47,000 strike in Bank Nifty options on February 20. 47000 strike has a call open interest build up of 23 lakh. Experts said that Bank Nifty is likely to rise further if more call writers exit at the 47,000 Strike ahead of the weekly expiry on February 22.

Here’s how technical analysts are positioning the Bank Nifty for the coming few sessions:

“Bank Nifty has given the first round of reversal on the daily charts after the recent underperformance. The index has given a ‘bullish double bottom’ breakout with major components of the index, like HDFC Bank, showing inherent strength from the long-term support zones. The index has formed a good base around 46,000 levels followed by 45,800 on the lower side, while the next immediate target level is 47,500-47,700, followed by all-time highs of 48,300-48,600 levels,” said Arun Kumar Mantri, Founder Mantri Finmart.

Mantri said that the banking index is on the verge of testing the unfilled gap of 47,200-48,000 on the daily charts, and any surge above 47,200 will trigger a fresh round of buying in the index in the coming days. “On the flip side, any close below 46,500 will be the first sign of a reversal for the traders, and the ongoing momentum may come to a halt.”

Technical chart of Bank Nifty showing Bullish double bottom breakout| Source: MantriFinmart

LKP Securities said Bank Nifty closing above the 47,000 level has signalled a strong “buy” mode. “Immediate support is now established at 46,700, marked by fresh put writing. The index is anticipated to reach the short-term target of 48,000, with any dip viewed as a buying opportunity.”

The index is on the verge of a triangle breakout on the daily scale. “Any sustainable move above the 50 DMA level of 46,750-46,800 will lead to a sharp upside rally in the index. In that case, the index is likely to test the level of 48,000 in the short term. While, on the downside, the 10-20 EMA zone of 46,000-45,800 is likely to act as immediate support for the index from a short-term perspective,” said SBI Securities.

HDFC Bank and ICICI Bank – catalysts of Bank Nifty upmove

The index heavyweights are showing good signs on the technical front. ICICI Bank is showing a bullish breakout on a closing basis, while HDFC Bank is showing signs of reversal from the weekly support zones.

“If these two banks start contributing to the gains, then the banking index may take a front seat in the markets and outperform the broader spaces,” said Mantri.

For HDFC Bank, Rs 1,380-1,400 remains the trend line support area on the weekly charts, and Rs 1,520-1,540 are the next targeted levels, according to Mantri. ICICI Bank has given a breakout above the Rs 1,020-mark on a closing basis. The support for ICICI Bank is around 1,000 on the lower side, he added.

“The banking index remained bullish after crossing and sustaining the resistance of 46,600, now marked as important support. A close above 47,200 would trigger further upswing. Bank Nifty is currently holding strong support of the 20 SMA as well. In today’s session, the major push came from HDFC Bank, rising by 2.63 percent. The Nifty PSU Bank index remained sideways today, but it has strong support around the 7,050 level, which could drive Bank Nifty closer to its all-time high of 48,636.45,” stated Samco Securities.

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