By Brijesh Bhatia
The start of the week witnessed a significant gap-down opening, igniting fear among traders and investors. But the day ended on a positive note. Market sentiment has been cautious, but there are signs that opportunities may emerge in the banking sector.
While Nifty has already surpassed its previous swing low of 22,784, Bank Nifty, which hit a low of 47,884 a few weeks ago, still holds its ground. This divergence could present an opportunity for bullish traders to focus on the banking stocks, as the sector appears poised for potential upside.
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What’s particularly exciting is that Bank Nifty has been hovering in a crucial demand zone. This, coupled with bullish reversal patterns forming on the charts of two significant banking stocks—Axis Bank and ICICI Bank—suggests that a shift in market dynamics may be on the horizon.
Before jumping on to the individual stocks, it is important to analyse the overall market condition.
Bank Nifty weekly chart Source: TradePoint, Definedge Securities
For the past six weeks, Bank Nifty has been hovering around the 62-Week Exponential Moving Average (62WEMA) channel, which serves as a significant support level. This consistent price action at this level indicates a potential buying opportunity as the index remains anchored within the demand zone.
Another key observation on the Bank Nifty chart is the formation of a Bullish Belt Hold candlestick pattern at the lower band of the channel. This candlestick formation is considered a strong reversal signal, indicating that sellers may be losing control and that buyers could step in to push the index higher. Combining this pattern with the support provided by the 62WEMA channel increases the likelihood of a bullish trend reversal in the near term.
Given these technical indicators, Bank Nifty may be on the cusp of a potential rally, and two banking stocks—Axis Bank and ICICI Bank—are showing signs of leading the charge.
Axis Bank
In January, mutual funds increased their stake in the bank by an impressive Rs. 9,316 crores, signalling strong institutional confidence in the stock. This is an important fundamental factor, as large-scale investments from mutual funds can be a precursor to higher stock prices.
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