Technical View: Nifty forms Inverted Hammer pattern, experts say be cautious on long side

India VIX, which measures the expected volatility in the market, moved up by 0.35 percent from 13 to 13.04 levels.

India VIX, which measures the expected volatility in the market, moved up by 0.35 percent from 13 to 13.04 levels.

The Nifty50 erased all its gains in last hour of trade and closed in the red for the fourth consecutive session on June 30, as all sectoral indices, except IT, ended lower.

The index formed bearish candle which resembles Inverted Hammer kind of pattern on the daily charts. An Inverted Hammer is a reversal pattern in which the index closes near its opening levels. It has a long upper shadow, small or no lower shadow, and a small body.

The index formed an Inverted Hammer or Shooting Star kind of candle on the daily chart which indicates a pause in bounce back if follow up supply happens on next trading sessions. However, it still requires confirmation.

Mazhar Mohammad of advised traders to remain cautious on long side whereas intraday traders can consider shorting below 15,670 for a modest targets of 15,550 levels by placing a stop above intraday high.

The Nifty50 started off the day higher at 15,776.90 and hit an intraday high of 15,839.10, but erased all gains in the last hour of trade to hit a day’s low of 15,708.75. The index fell 27 points to close at 15,721.50.

“Nifty50 registered yet another day of listless session as it remained in a narrow range of 131 points before signing off the session with a bearish candle with a long upper shadow which resembles Inverted Hammer,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at told Moneycontrol.

However, “these patterns may not be significant enough as Nifty is directionless and stuck up in a range of 15,900 – 15,700 levels and need to emerge out of this for a directional move,” Mazhar Mohammad said.

He further said as the Nifty is witnessing selling pressure at higher levels, bears appear to be gaining upper hand which is also further supported by deteriorating technical indicator or oscillator setup as more number of indicators are turning bearish at lower time frame charts.

According to him, if Nifty slips below 15,700 levels then correction may get accelerated with targets towards 15,550 levels.

Similarly, bullish sentiment for near term shall get strengthened with targets present between 16,100 – 16,300 levels, if the index closes above 15,900 levels.

India VIX, which measures the expected volatility in the market, moved up by 0.35 percent from 13 to 13.04 levels.

On options front, maximum Put open interest was seen at 15,500 followed by 15,000 strike while maximum Call open interest was seen at 16,000 followed by 16,500 strike. Call writing was seen at 16,000 then 15,700 strike while Put writing was seen at 15,500 then 15,000 strike.

Option data indicated that the Nifty could see an immediate range of 15,600 to 15,900 levels in the coming sessions.

Bank Nifty opened flattish at 35,001.90 and bounced to hit a day’s high of 35,214.90 but it could not hold its gains and fell sharply to hit an intraday low of 34,730.45.

It continued its weakness for third consecutive session and closed the day with losses of 238.10 points at 34,772.20. It formed a bearish candle on daily scale and continues forming lower highs – lower lows from the last two sessions.

“Bank Nifty has to hold above 34,750 levels to move up towards 35,000 and 35,250 while on the downside support is seen at 34,500 and 34,250 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

On stocks front, “Bullish setup was seen in Cummins India, REC, PFC, SRF, Dr Lal Pathlabs, Escorts, Bharat Electronics, Infosys, Torrent Power and Divis Labs while weakness was seen in DLF, PNB, ACC, ONGC, Gail, UPL, Indus Tower, Eicher Motors and Cholamandalam Investment,” he added.