Technical View: Nifty forms Hanging Man pattern, experts say go long only on a close above 15,900


The Nifty50 gained strength in late morning deals after a volatile start and remained strong for the rest of the session to close above 15,850 on June 25. Banking & financials, metals, auto and select IT stocks lifted sentiment.

The index formed a bullish candle, which resembled Hanging Man pattern, on the daily chart, while there was bullish candle on the weekly scale. The index gained 1.1 percent during the week.

A Hanging Man is a bearish reversal candlestick pattern, usually formed at the end of an uptrend or at the top. In a perfect ‘Hanging Man’ pattern there is either a small upper shadow or no upper shadow at all, a small body and long lower shadow.

Considering the indecisive trend, traders should go long only on a close above 15,900, said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Intraday shorting opportunity can be considered below 15,770 for a modest target of 15,690.

The Nifty50 started the day on a positive note at 15,839.35 but hit an intraday low of 15,772.30 amid volatility. It, however, picked up strength in late morning deals and extended gains to hit the day’s high of 15,870.80. The index rose 70 points to close at 15,860.40.

“As trend in the short term seems to be mixed and indecisive, it looks inevitable for bulls to register a breakout above 15,900 on a closing basis to witness a sustainable upmove,” Mohammad said.

In that scenario, a range breakout target of 16,300 can be projected as the Nifty appears to be limiting itself to the 15,500–15,900 consolidation range, he said.

If the index fails to sustain above 15,770 in the next session, it may fall to 15,700 – 15,670. A close below 15,670 shall weaken the Nifty further, with targets placed near 15,500, Mohammad said.

India VIX fell 11.47 percent from 15.09 to 13.36 levels, which also supported the bullish bias.

Since it is beginning of new series, the options data is scattered at different strikes. Maximum Put open interest was seen at 15500 followed by 15000 strike, while maximum Call open interest was seen at 16000 followed by 16500 strike.

Call writing was seen at 16400 and 16500 strike while Put writing was seen at 15800 then 15400 strike. Option data indicated that the Nifty50 could see an immediate range of 15,700 to 16,000 for the coming days.

The Bank Nifty opened positive at 34,916.65 and moved north through the day. Banking stocks took the index to 35,491.95 levels and recovered losses of the previous week.

The index rallied 537.70 points or 1.54 percent to close at 35,364.70 and formed a bullish candle on daily scale, and a bullish engulfing candle on the weekly frame.

“The index has to hold above 35,250 to move up towards 35,750 and 36,000 levels, while on the downside, support is seen at 35,000 and 34,750 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

On the stock front, a bullish setup was seen in NALCO, Apollo Hospitals, Max Financial Services, Tata Steel, Cummins India, Axis Bank, Glenmark Pharma, SBI, ICICI Bank, Bharat Electronics, SRF, Tata Power, IndusInd Bank, Maruti Suzuki, Muthoot Finance, Bajaj Finserv, Infosys and L&T. Weakness was seen in Reliance Industries, HUL, ONGC, Mahanagar Gas and IOC.

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