In recent turbulent times in the markets, it is very difficult for many traders to manage their positions. Here are some of the guidelines on how to manage your positions in a High volatile market using market profile.
Bank Nifty is currently trading at the swing extreme with 10-day ADX holding above 40 levels which indicates extreme positive sentiment with mean reversion odds If ADX value likely to start sliding below 40.
Here is the historical PE-Ratio of Bank Nifty. This time there is a hockey stick growth in the banking index which is up by 10.42% during the month of March 2019 alone. In fact, touched the magical round number levels of 30,000 during intraday on 22nd March.
Nifty Futures and Bank Nifty Futures are trading in a sideways compression mode for quite some time in Jan 2019 series. Both Nifty Futures and Bank Nifty Futures are trading very close to the current swing high levels.
Bank Nifty Futures tested an intraday high of 27425. Trading sentiment was getting into extreme which possibly indicates overbought levels.
Here is the historical PE-Ratio of Bank Nifty. Recently there is a hockey stick growth in PE ratio of Bank Nifty. NIFTY Bank Index comprises of the most liquid and 12 large Indian Banking stocks from the Banking sector. Surprisingly top 3 constituents namely HDFCBANK, ICICIBANK & KOTAK Bank alone contributes to 65% of the weightage.
Bank Nifty Futures sellers are in control however momentum sellers are clearly missing from the market. Hourly support comes around 26206 levels. Throughout the June month bank nifty futures is trading in a 1000 point range and the momentum is falling for most of the banking stocks. Only Few stocks like HDFCBANK, Kotak Bank, Yes bank and rest all from the Bank Nifty pack is showing declining momentum.
Mondays trading session Bank nifty opened with global optimism and the day is seen driven mostly by intraday and short term buyers in the counter. Serious long term money is missing in the counter and lack of enthusiasm prevailed post the gap up in Bank Nifty Futures and also underperformed the broader index Nifty 50 thereby formation of a dull boring rotational trading rest of the day.
Last week trading session ,Bank Nifty futures attracted lot many short term sellers came to compete in the market. Trading behavior was in such a way that most of the traders we dealt with them are mechanical/emotional/price based short term sellers. Especially the emotional sellers shown post the RBI policy announcement are possibly the price based sellers initiated trades based on price breaking down below the previous week low or price testing 50 day moving average on the daily timeframe.
Bank Nifty since the start of Jan 2017 had done a 1000 points+ recovery and moved up without much rotations on the daily charts. Trading Sentiment remains positive for the weekly timeframe as well as daily timeframe. However trading sentiment on the daily timeframe is at the extreme which could bring short term corrections or volatile sideways action.
On the broader range Bank Nifty Futures is in sideways mode between 18000-20500 for the last 7 months which indicates that clearly the market is not driven by the longer term players. Long term players dominance is less reflected in the last 7 months.
The RBI cut benchmark rates by 25 basis points (bps) on 4 October, bringing down the repo rate from 6.5% to 6.25% since then there is a significant underperformance in banknifty futures as compared with nifty futures. And this underperformance in banknifty futures is expected to continue in the upcoming trading sessions as every minor rallies in banknifty gets rejected at higher level and sellers stepping