Technical View: Nifty forms #39;Hammer#39; pattern, begins 2019 on strong note; next target seen at 10,985

January 01
17:29 2019

The market started off calendar year 2019 on a strong note as the Nifty50 closed above 10,900 levels on Tuesday, forming bullish candle which resembles a ‘Hammer’ kind of pattern on daily charts.

The Nifty opened higher at 10,881.70, but immediately wiped out those gains to consolidate and hit an intraday low of 10,807.10. However, it managed to gain strength in last hour of trade, driven by banking & financials and touched a day’s high of 10,923.60. The index closed at 10,910.10, up 47.60 points amid absence of global cues.

The positive momentum could be possible only if the Nifty holds 10,850 levels in coming sessions, experts said, adding the next target would be 10,985 followed by 11,176 levels.

“The Nifty witnessed a strong recovery in last hour of the session and recovered by more than 100 points from lows. It formed a Hammer candle on daily scale which indicates that decline is being bought in the market,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.

A Hammer which is a bullish reversal pattern is formed after a decline. A Hammer consists of no upper shadow, a small body, and long lower shadow.

The long lower shadow of the Hammer signifies that it tested its support where demand was located and then bounced back.

Chandan said now the index has to hold above 10,850 zones to extend its move towards next crucial hurdle of 10,985 then a fresh leg of rally towards 11,176 levels.

On the downside index has support at 10,800-10,777 zones, it added.

Till it holds above 10,777 zones, overall bias could remain positive to rangebound while a decisive move above 10,985 could start the fresh up move towards 11,176 levels, he said.

On the option front, maximum Put open interest (OI) was at 10,500 followed by 10,000 strike while maximum Call OI was at 11,200 followed by 11,000 strikes.

Fresh Put writing was seen at 10,800 strike while Call writing was seen at 11,100 strike. Option band signifies a broader trading range in between 10,777 to 11,100 zones.

India VIX fell by 4.22 percent at 15.32 levels.

VIX has to hold below 16 zones to get the scope to surpass its immediate barrier of 10,985 zones, Chandan said.

Bank Nifty managed to hold 27,000 zones and witnessed strong momentum towards 27,400 zones. It surpassed immediate hurdle of 27,350 zones and given a recent highest daily close in last three months. The index gained 232.20 points to close at 27,392.40.

Chandan Taparia said now it has to hold above 27,250 zones to witness an upmove towards 27,500 then 27,750 levels while on the downside support exists at 27,000 levels.

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