Day trading guide: Bank Nifty needs to break above 31,000 to regain momentum

Following Tuesday’s recovery, the Nifty opened at an uncharted zone and made a record high at 13,692. However, Nifty’s high/low range was confined to 86 points, which is its lowest daily range since 23 October. Forming a small body with relatively large lower shadow, the Nifty formed a ‘hanging man’ candle pattern. Appearance of such a pattern at current levels could attract some profit taking. However, follow-up action needs to be closely watched and trailing stop losses, higher traders should protect their existing long positions.

Meanwhile, another failed attempt to surpass 31,000 in the Bank Nifty dragged it lower. A decisive breakthrough above 31,000 is important to regain momentum on the upside. Snapping six weeks’ winning streak, the bulls took a pause in the PSU Bank index this week. The index underperformed the most, losing 1.7 per cent. The Realty index stood out strongly, gaining 5 per cent.

Equity recommendation
Buy ABB India near Rs 1,190

• Stop loss: Rs 1,145
• Target: Rs 1,280
• With sustained moves above the important averages, the stock has witnessed congestion breakout on a comparatively higher volume. Appearance of a large bullish candle ensures shift of range on the upside.

Pair Trade
Buy MGL (Mahanagar Gas) December future near Rs 1,066 and Sell GAIL December future near Rs 125

• Current ratio: 8.52
• Stop loss on ratio: 8.09
• Target on ratio: 9.37
• 60 days correlation: 90+
• In the medium-term uptrend, currently the ratio of MGL/GAIL is hovering at multi-month lower levels. Positive follow up could mean that the ratio is due for mean reversion and MGL could outperform against GAIL.

(Amit Trivedi is CMT, Technical Analyst - Institutional Equities, YES Securities. Views are his own.)