Technical View: Nifty forms Hammer-like pattern, next resistance seen at 11,650
Nifty50 snapped a four-day losing streak on July 11 and inched closer to 11,600. All sectoral indices ended in green with Nifty auto, metal, pharma and PSU bank indices rising 1-2 percent.
Nifty rallied 100 points intraday and formed small bullish candle which resembles a Hammer kind of formation on daily charts.
If the pullback rally extends and helps Nifty close above 11,600 levels, then the index could reclaim 11,700 in coming sessions, said experts.
Hammer is a bullish reversal pattern 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.
The Nifty50 after opening higher at 11,561.45 extended southward journey as the day progressed and hit a day’s high of 11,599 and recouped all previous day’s losses. The index closed 84 points higher at 11,582.90.
“Nifty50 appears to have taken support around 11,500 levels before registering a pull back rally which resulted in Hammer kind of formation. As our twin momentum oscillators generated a buy signal the probability of witnessing a rally towards 11,700 remains higher though a confirmation in this regard will occur once Nifty manages a close above 11,600 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.
He said in this pull back attempt if Nifty manages to get past 11,700 levels then for this upward corrective rally ideal target remains in the zone of 11,771–11,797 levels while on the downsides 11,460 shall remain critical support in the near term.
Mazhar Mohammad advised traders to create long positions in Nifty either on dips or on a close above 11,600 levels but technical stop remains below 11,460 breach of which can resume the downswing with initial targets of 11,400.
India VIX fell sharply by 8.32 percent to 12.50 levels.
On the options front, maximum Put open interest (OI) is at 11,300 followed by 11,500 strike while maximum Call OI is at 12,000 followed by 11,900 strike.
Put writing is at 11,200 then 11,300 strike while Call writing is at 11,650 followed by 11,900 strike.
Experts feel option data suggests a trading range in between 11,400 to 11,800 zones.
“Index has respected to its long term trend line by connecting major swing lows of 10,004, 10,585 and 11,108 levels. It started to form higher highs – higher low from past two trading sessions and supports are slightly shifting higher. Now it needs to continue to hold above 11,550 zone to extend its bounce towards next hurdle of 11,650 zones while on the downside supports are seen at 11,500 then 11,420 zones,” said Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Bank Nifty managed to hold 30,500 level and finally ended in positive territory after the decline of last four trading days, rising 194.45 points to 30,716.55.
“It is forming higher highs – higher lows from past two trading sessions and now need to hold above 30,600 zone to witness a bounce towards 31,000 level while on the downside major support is seen at 30,500 then 30,250 zones,” added Taparia.