20th Oct ’23 — Contrasting Trade Signals by N50 and BN today — PostMortem on Nifty & BankNifty
Nifty Analysis
Nifty had a gap-down opening with the long wick on the 1st candle retesting the 19520 swing-low we hit yesterday. Right after that the momentum just died out. There were no wild swings or flash moves — we just traded flat. A consolidation at these levels was not something I had in mind. It is too early for that as worsening global macros should have pushed Nifty below 19310 by now.
As I write this newsletter, India VIX ended the trade at 10.81 and US VIX is at 21.6. Can you imagine we have a 100% gap between the India and US volatility index? I am 100% sure that one of these markets is pricing in the information wrongly. No way both of them can be right.
On the 1hr chart — today’s 0.42% drop has not moved the needle or bias. The first support of 19446 is still untested, which means higher weightage will go for range-based trade instead of outright bearish. Keeping the global macros in mind, I still wish to continue my bearish stance and expect the 19446 to be taken out on Monday and retest the 19310 soon.
BankNifty Analysis
The greatest surprise of today came from BankNifty. A perfect flat closing today. I was hoping for a 400+ pts fall today considering how the global indices ended the trade yesterday, also how the US banks were tanking.
The resilience Indian banks showed today deserves special mention. If you look at the price action today, we went green by 09.35 and then had a range-bound trade. At 13.15 we had a 114pts surge super-strong green candle, but we quickly retraced that. If BankNifty had fallen just as much as Nifty50 today — the entire story would have been different. The immense weight BN has over N50 ensured the cuts are not that deep.
On the hourly time frame, things look still bearish as the 44068 resistance still stands. I agree that we did not have momentum today, but if we stay in this zone — the selling will intensify. My targets of 43404 and 43253 remain unchanged.