In our last update on Thursday evening we had noticed a discrepancy between value and price in the BankNifty and had posted it as a red flag with these words- The weekly picture paints a small alarm as the recent upmove is not enjoying value.– http://www.vtrender.com/content/13042012
Here are the charts :
The NF put in a Double Distribution (DD) day on Friday . A DD day is new information entering the market and the market reacting to that new information by driving price to a different place from where it is currently auctioning. During the course of the day, we saw selling intensify once the POC of the previous day was broken at 5284 leaving behind a single row of prints which was the new selling in the market.
We have two possibilities for the next day baaed on this behavior. If the selling was one-off and not strong then we will get a move back into the single prints and a possible retouch of 5284. Anything above 5284 would mean that the seller of Friday has lost control.
However if the day following the DD day is met by an open below the lows of the day and value is established lower in the IB then 5284 would mark as a stop loss for the new swing developing which in this case will be down. Immediate targets would be the high volume zone at 5168.
The BN also had single prints from the POC of the previous day at 10422. The day was an incomplete DD in the BN as in the NF.
10260 supported the index in the big fall and 10178 would be the obvious targets for any weakness at the open.