Half of Nifty Bank constituents above 50-DMA. Anand James on how to trade this week
As more than 50% of Bank Nifty constituents are still above 50-DMA, the index could find new leaders, says Anand James, Chief Market Strategist at Geojit Financial Services.
“Also the Bank Nifty index appears due for a bounce back, but we would be first interested in initiating shorts on pull back to 45000. However, we feel that, after due consolidation, the latter part of October could see a breakout beyond this region,” he says. Edited excerpts from a chat:
Nifty ended September 1.5% stronger despite all the negative news surrounding rising crude, bond yields and dollar index. Given the fact that FIIs are having $733 million short position in index futures, where do you see the index going in October which is known as 'Bear Killer'?
FIIs have ramped up their index future shorts, which now constitute 27% of shorts in the segment across participants.
Also, the short to long proportion of positions by FIIs has tested 70%, a historically high figure. However these figures need to be seen in perspective of the total OI of shorts, which is still lesser than that visible at the start of September. Also, we saw shorts at an extreme in late July, post which an uptrend was seen.
Incidentally, October is historically a good month for Nifty, and the high amount of shorts, present an ideal set up for reversals. With Nifty, 19420/320 region stands in the way of an 18600, what last week’s sharp decline almost promised. However, Friday’s Inside Bar encourages us to look at the prospects of revival, and a run beyond 20000, if a close above 19780 is managed.
It looks like till HDFC Bank starts itching upwards, it would be nearly impossible for Nifty Bank to sustain positive momentum. Would you be comfortable shorting the stock as
