The Bank Nifty chart showcases a fascinating pattern known as the “Dual Momentum Top,” indicating potential short-term bearishness. Let’s dive into the details of this pattern, its implications, and the trading strategies that can be derived from it.
Understanding the Dual Momentum Top Pattern
Formation: The Dual Momentum Top pattern forms when there are consecutive days with higher highs and lower highs, with the price peaking within the first half-hour of trading (A period). On the Bank Nifty chart, this pattern has created a significant resistance zone around the 53000-53300 levels.
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Price Action: Following the dual momentum top, there has been seven days of sideways movement, indicating a consolidation phase. This type of price action often signifies indecision in the market as participants are absorbing the recent highs.
Key Resistance Levels
Primary Resistance: The area between 53000 and 53300 is acting as a major resistance zone. The dual momentum pattern has solidified this level as a strong barrier that the price has struggled to breach.
Immediate Resistance: On 12th June, a strong excess was observed, creating an immediate resistance around the 52720-52850 levels. This level needs to be monitored closely as it will play a crucial role in determining the short-term market direction.
Short-term Bearish Outlook
Resistance Holding: As long as the immediate resistance (52720-52850) remains intact, bearish sentiment is likely to prevail. Traders should watch for any failed attempts to break above this resistance, which would confirm the bearish outlook.
Downside Targets: The immediate downside targets are around 51900 and 51600 levels. These targets are derived from previous low points and areas of high volume concentration, which often act as magnets for price during a downtrend.
Market Profile Concepts
Several key Market Profile concepts can be applied here:
Excess: The strong excess observed on 12th June indicates a rejection of higher prices, marking the end of the auction at that level and suggesting a shift in market sentiment.
Balance Area: The sideways movement following the dual momentum top represents a balance area. According to Market Profile theory, breakouts from such areas can lead to significant price moves.
Trading Strategy
Resistance Zones: Monitor the resistance zones closely. A failure to break above 52720-52850 will reinforce the bearish outlook.
Short Positions: Consider initiating short positions near the resistance levels with stop-losses just above the 53300 level to manage risk effectively.
Targeting Downside: Aim for the downside targets of 51900 and 51600, adjusting stops to lock in profits as the price moves in favor.
The Bank Nifty Market Profile chart demonstrates a clear dual momentum top pattern, indicating potential short-term bearishness. Traders should watch the immediate resistance zones and manage their trades accordingly to capitalize on the expected downtrend.
