Technical View: Nifty forms #39;Hanging Man#39; pattern on weekly chart; hints at bearishness
After a rangebound day of trade, Nifty50 gained momentum in later part of the session and closed strong on April 12 which ultimately helped the index trim weekly losses to 0.19 percent.
The index decisively closed above 11,600 levels and formed bullish candle on daily charts. For the week, it formed bearish candle which resembles a ‘Hanging Man’ kind of formation on weekly scale.
Doji candle in the previous week and Hanging Man this week indicated exhaustion of momentum, but there is some relief after positive candle for last two sessions of the week, experts said, adding the upside from hereon will be possible if index decisively closes above its record high of 11,761.
A Hanging Man is a bearish reversal candlestick pattern which is usually formed at the end of an uptrend or at the top. In a perfect ‘Hanging Man’ pattern either there will be a small upper shadow or no upper shadow at all, a small body and long lower shadow.
The Nifty50 after opening higher at 11,612.85 turned rangebound and gradually drifted lower in late morning deals to hit a day’s low of 11,578.80. But the index rebounded led by buying interest in the last couple of hours of trade and hit an intraday high of 11,657.35. It closed 46.80 points higher at 11,643.50.
“Albeit Nifty50 put up a smart recovery in the post-lunch session it registered a Hanging Man kind of formation on weekly charts which was followed by Doji of preceding week. These kind of indecisive formations for two successive weeks are certainly hinting at exhaustion of momentum,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
Hence, he said unless Nifty decisively breaches 11,760 levels more upsides shall not be expected in the near future.
Nevertheless, positive candles of last two sessions are pointing towards some stability in the near term which will be confirmed once Nifty50 closes above 11,710 levels and in that case, trend can remain sideways with positive bias and can lead to a retest of lifetime highs, he added.
Meanwhile, it looks inevitable for bulls to sustain above 11,550 levels to prevent further damage as a close below the said level shall unfold fresh leg of downswing, Mazhar Mohammad said.
India VIX moved up marginally by 0.18 percent to 20.99 levels.
On the options front, maximum Put open interest (OI) is at 11,000 followed by 11,500 strikes while maximum Call OI is at 12,000 followed by 11,800 strikes.
Put writing is at 11,500 followed by 11,700 strikes while Call unwinding is at the immediate strike price.
Option band signifies a trading range in between 11,550 to 11,750 zones, experts said.
“Price set up in daily scale suggests that supports are intact while hurdle is also visible at lifetime high at 11,761 zones is restricting its upside momentum,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.
He said index has been consolidating in between 11,550 to 11,760 zones from last eleven trading sessions and now requires to hold and sustain above same to retest its lifetime high of 11,761 and then 11,888 zones while on the downside crucial support is intact at 11,550 zones.
Bank Nifty managed to hold its previous day’s low and gradually extended its gains towards 30,000 levels. The index closed 152.45 points higher at 29,938.55.
It has negated its lower highs formation after four trading sessions but formed a bearish candle on a weekly scale.
“Now it has to cross and hold above 30,000 to witness an up move towards 30,250 then 30,500 zones while on the downside major support is seen at 29,700 then 29,500 levels,” Chandan Taparia said.