What could be the reason of Bank Nifty’s bullish or bearish move on a particular day when there is no news release specific to the banking sector on that day or a day before?
I think today it is because of heavy short covering started at second half which resulted in huge move in bank nifty . Similarly as bank nifty only consists of 12 stocks with hdfcbank and other private banks as more then half of weightage , stock specific movements also results in little euphoric situations which tends to settle soon.
I don’t agree with the gentleman above, all these moves are cyclic in nature because you can find such moves even without any news or event. All the constituents of BN are banks , I mean from same sector , so you can easily find out that when the money comes in and goes out, on NSE nifty and bank nifty options are heavily traded, to hedge the big players positions, all the stocks are moved in a synchronized manner to get the best results out of it, all the money is put in or out through algos or hfts. Technicals play very important role in such moves .
In terms of Price Action, this was an ignored supply zone flipping to become a demand zone. Much PA goes on in the background when such a phenomenon occurs.
- Usually there are trapped sellers who were stuck due to the overwhelming move on the upside on the day (20th Sep) the supply was taken out, who were waiting to buy.
- The insti buy order flow was so strong that day that there was a dearth of sell orders to match them causing price to shoot up and leave behind unfilled buy orders.
When price returns to such a zone, it usually flips it’s nature due to the above reasons. Although, the potency of such a flip is difficult to gauge at times.
Institutional buying indeed makes a lot of sense here. Say, for example, if a MF or an Insurance company (or may be a few of these combined) increased their exposure in the banking sector on this day then, it makes perfect sense that the same would have been diversified via taking positions in multiple banks. But the fact that one can easily find when the money comes in and goes out of a particular sector is somewhat difficult to do.
Certainly Short covering would have contributed but I guess the main reason was sth else because a decent level of ‘short build up’ on the Put side had already taken place on the previous day which indicates that most probably the big players had an idea of an upcoming big move in BN (probably some technical indications) and hence, they had made their arrangements for benefiting from it. But the question is, what exactly was the reason that almost all banks enjoyed buying simultaneously on the same day. And in the absence of a sector specific news in the previous 1 or 2 days, what else could be the reason for such a cumulative unidirectional move!!
Did you watch today’s movement. Do you think that technicals can predict the market. It is not that easy. People know reasons of move after it happens. And like I said earlier these euphoric movements tend to settle soon.
The banks which enjoyed buying yesterday witnessed selling today
It may sound unacceptable but believe me there are certain parameters on which anyone can find the upcoming big up or down move with high precision, sorry to say , I can not reveal it .
Who says it is easy? It’s not easy, that’s why most of the option writers (the Put writers I mentioned earlier who took bullish positions in a market/sector that was falling continuously for the last 5-6 sessions) are big players who have the resources and infra to predict market movements and verify those predictions from ‘n’ no. of angles before taking positions that in turn is achieved by studying huge amount of data in great depths which would require real good resources that require a significant investment. So agreed, it’s not at all easy but also not entirely unachievable for a retail trader as well…
I second it completely. With sincere efforts, this can be achieved. However, the only thing that made me ask this question was that in the absence of a banking related news, how come almost every bank participated in this rally?
That reasoning is really interesting and such a logical linking between this rally and the last rally. Just out of curiosity, when you say that
can I also interpret this as a ‘Resistance region’ turned into a ‘Support region’ or may be a ‘Drop base drop’ depending on what one expects the future direction of the sector to be?
P.S. - Thanks for this great food for thought…
It has been 2 years since I entered this market, as per my analysis , these days short term trading players are highly active and totally in control, long term investing could be seen once the nifty reaches 12100 and above, market is confused about its own trend because until we see a good USA = China deal , USA = India deal and finally a good budget next year, till then it’s going to be the same story. The market makers never stop making money , they have best knowledge, information, infrastructure, tools, systems, people to trade, currently they are active in short term trading of futures and options of nifty and bank nifty . They are exploiting each and every opportunity to make money , market has retraced almost all gains achieved after the announcement of corporate tax cut news. These days fundamentals are over whelmed by the technicals .
This is a characteristic of Bear market , I was waiting for a rally to short , BankNifty was about to break 28470 level , at that time Government announced 5% dearness allowance to its employees , after that announcement BN started sudden rally, probably market was expecting some more good news from the Government and also short covering moved BN higher. . I think this is the reason there was a rally on Bank nifty. But i think some of the DIIs are ignoring the Bear market and buying continuously, where as FIIs are selling continuously. I think 10 billion tax cut & 5% Dearness allowances are nothing for the country of our Size & scale. So yesterdays & Today’s market action shows the bearishness of the market.
Yes, something quite similar to this, how R becomes S and vice-versa, Dem becomes Supp and vice-versa due to these factors.