At Vtrender we are firm believers in inter market and intra market relationships between stocks, currencies, commodities and the like.
Within an index also we keep looking for symmetry( to use a Market profile term) or the co-relation between indices to get an edge to benefit our trading.
It is a well-known fact that the BankNifty leads the Nifty up and down, a fact we have been pointing out over the past one year. But today we have to look at one of the major generals of the army, to get an idea of how the broader market will perform over the shorter term.
Our leader of the lead index ( Bank Nifty) is of course SBI.
One need not look much beyond the last Mahurat session in early November and the SBI price of 3500 printed that day. It need not be stressed that the index never saw 6335 after that day.
So whilst SBI came off a whopping 1000 points, the Nifty followed. The army always follows a general.
That’s in the past, we now come to the present and see what SBI has been doing recently.
Here’s a composite profile of the SBI futures :
Earlier on friday morning , when we were watching for signs of acceptance in the Nifty futures below the 5200 level, we had one eye on SBI which had formed a “b” shaped profile the previous day. In Profile a b shaped pattern on the charts is often an indication of shorts covering.Also the lows of friday were the same spot from where SBI had done a jump of 250 points in 4 sessions previously in Jan.So the level had it’s importance clearly marked.
The composite profile completes the rest of the story.
The ‘b’ shape was confirmed friday as well and this morning the profile accepted the activity on friday and closed at the upper end of the bracket below the important 2706 zone.
Coincidentally the Nifty future closed around 5445 levels, an important reference level for us for the next 125-150 points.
Tomorrow we will watch SBI again to see if it can once again show the way.