Nifty Bank hit an intra-week high of 42,622.75, before closing the week at 42,437.45. Thus, the banking index managed to close above the closing level of the previous week.
On the weekly chart, the index is holding above its 21-day moving average and this would be an important support.
A momentum indicator RSI and MACD are both in the positive zone. Among the private banks, we expect Kotak Mahindra Bank and ICICI Bank to be the favorites. While in the PSU, banks such as SBI and Canara Bank are still strong and could make gains over the coming week.
Nifty Bank November futures are trading at a premium of 67 points. On the options side, the Nifty Bank Put options distribution shows that the 42,000 level, followed by 41,500, has the highest concentration of open interest (OI), which may serve as support for the current expiry.
The Nifty Bank Call strike of 43,000 followed by 43,500 witnessed significant concentrations of OI and may act as resistance for the current expiry.
Technically, Nifty Bank is moving in the positive bullish channel with the higher-higher low formation. After consolidating in the 41,400-42,600 range last week, it has built a strong base near the 42,000 level.
We could see a new breakout if the index falls below 42,000 at the close. On the other hand, if the 42,700 level is removed, we may see a new all-time high the following week.
Traders can offload certain bank PSU actions from higher tiers. It would be a cautious positive approach for the coming week. However, we are currently directly at the top of the spectrum, preparing for what we expect to test at 44,000-45,000 in the coming year.
(The author is an executive director at Choice Broking)