The global stock market has been a theatre of dramatic swings lately, heavily influenced by the ongoing tariff war and its subsequent stock market volatility. India’s benchmark index, Nifty 50, has mirrored this turbulence, showcasing significant ups and downs. As indicated by the Nifty 50 chart, we witnessed the Nifty50 index oscillate from a high of 23,869 to a low of 21,800 and recover to the 23,000 level.
In our previous analysis, we highlighted potential bullish harmonic reversal patterns, and our conviction remains firm as long as the recent low of 21,743 holds. The market holiday on April 10th, 2025, sets the stage for a potentially volatile Friday session. The robust positive momentum witnessed in the Dow Jones, S&P 500 (SPX), and Nasdaq, with gains ranging from 7-10%, strongly suggests a gap-up opening for the Indian markets as Gift Nifty trading above 23,000. The bulls appear poised to continue their upward trajectory, and a breach of the previous swing high of 23,869 should not surprise them.
While our previous focus was on the bullish move in Nifty50, the Bank Nifty is another crucial index for traders.
Over the past few weeks, the Bank Nifty has demonstrated remarkable strength, outperforming the Nifty 50. This outperformance comes amidst profit booking in the IT and Pharma sectors, fuelled by anxieties surrounding a potential cooling off in global markets.
The weekly chart of the Bank Nifty signals bulls are in control of the trend. Dips have consistently been met with buying interest, indicating strong underlying demand. The bulls have strategically utilised the Moving Average Channel, specifically the 100WEMA Channel, which has acted as a significant demand zone since 2020.
During the recent market downturn triggered by war tariff concerns, the index retreated into this channel. However, substantial accumulation was observed, propelling the index from a low of 47,844 to 52,000. The dip caused by the tariff war found support at 47,702, forming a compelling double-bottom pattern on the chart. The aggressive buying activity witnessed at both bottoms of this double bottom adds further conviction to the bullish outlook.
Additionally, a clear channel pattern is discernible on the chart. This channel’s resistance currently stands at 52,200, approximately 2,000 points above Wednesday’s closing. A decisive break and confirmation above the 52,500 level could potentially pave the way for a new all-time high and subsequently lead the index into an area with limited historical resistance, often referred to as a no-resistance zone.
Conversely, for the bears to regain control, the index must decisively breach the 47,500 level, which currently appears to be a distant prospect.
Two Banking Stocks Under the Radar
Two stocks within the banking sector present interesting trading opportunities – one exhibiting a breakout structure and the other showing a potential reversal structure.
Kotak Mahindra Bank, a prominent player in the Indian banking sector, has demonstrated strong bullish momentum.
On the weekly chart, the stock price witnessed a significant bullish breakout at the Rs 2,000 mark. Following this breakout, the stock rallied by approximately 10%, reaching a high of Rs 2,202 before experiencing a dip during the recent market correction.
Interestingly, the breakout levels have been retested, and the subsequent reversal move could serve as a potent confirmation of the breakout, retest, and rally pattern, presenting a compelling opportunity for bulls. The lower trading volumes observed during the recent fall suggest that existing bulls have largely maintained their long positions, and a reversal from the retest level could attract fresh buying interest in the stock.
IDFC First Bank, a relatively newer entrant in the banking space, presents a contrasting yet equally interesting scenario.
On the weekly chart, the stock has touched its two-year low and has been trending within a falling channel pattern characterised by a lower-high-lower-low structure. According to this established bearish pattern, the bears appear to be in control.
So, why is this stock on our buying watchlist?
A closer analysis of the recent price action reveals a crucial divergence. Despite the Bank Nifty breaking its previous swing low, IDFC First Bank’s price has managed to hold above its own previous swing lows. A break above the immediate previous swing high at Rs 61 could trigger a potential bullish momentum, prompting traders to consider long positions.
Additionally, a more substantial breakout above the falling channel resistance at Rs 68 could signal the potential beginning of a new uptrend. Therefore, IDFC First Bank warrants close attention as a potential reversal play.
In conclusion, while the stock market volatility induced by the tariff war has created uncertainty, opportunities for astute traders persist. The Nifty 50 and Bank Nifty charts suggest a prevailing bullish sentiment, provided key support levels hold. Within the banking sector, Kotak Bank’s breakout and IDFC First Bank’s potential reversal offer distinct trading setups to capitalise on the market trends.
Disclaimer:
Note: We have relied on data from http://www.definedgesecurities.com throughout this article. Only in cases where the data was unavailable have we used an alternate but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Brijesh Bhatia has over 18 years of experience in India’s financial markets as a trader and technical analyst. He has worked with UTI, Asit C Mehta, and Edelweiss Securities. Presently, he is an analyst at Definedge.
Disclosure: The writer and his dependents do not hold the Stocks discussed in this article. However, clients of Definedge may or may not own these securities.
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