The fact that the potential reversal zone of the harmonic pattern is formed near-critical hurdle makes a case for a small dip in the index resulting in a retest of the breakout levels.
The Nifty Private Bank index witnessed strong correction in March in tandem with other benchmarks as well sectoral indices. The bounce also happened in line with other sectors and indices.
Post that it has not been outperforming much which can be attributed to the fact that major names were stuck in a range. However, volume participation was interesting during this while.
The index has now given breakout from this consolidation with a similar pattern observed in some of the major names.
Midcap banking names like RBL Bank, Bandhan Bank, and IndusInd Bank have already started outperforming with strong performance seen in the last few days.
To start with, the index itself witnessed a strong upmove post the breakout at 12800 levels. However, it is now approaching a crucial hurdle placed around 13800 levels as shown in chart 1.
Also, the index has formed a bearish harmonic crab pattern which is a reversal pattern in nature as shown in chart 2.
The fact that the potential reversal zone of the harmonic pattern is formed near-critical hurdle makes a case for a small dip in the index resulting in a retest of the breakout levels which will make the index and its constituents very interesting for a strong upside.
The overall trend remains positive. The issue here is prz being triggered with a large candle that can distort the pattern.
Largecap names like ICICI Bank, Axis Bank, and Kotak Bank have seen a breakout as well implying a strong upside is possible in them. The volume through more than the last couple of days is still not as strong as one would expect after a breakout of few weeks consolidation. This raises the possibility of the retest of a breakout with follow up volumes which can drive these stocks higher.
(Gaurav Bissa, VP-Technicals and Derivatives at LKP Securities)
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