Technical View | Nifty forms Hanging Man pattern, further rally unlikely till it conquers 20 DMA

Stock Market, Share Market

Stock Market, Share Market

The Nifty50 gained nearly 150 points on February 10, extending uptrend for third consecutive session, thanks to the dovish policy presented by the Reserve Bank of India against analysts’ expectations of hike in reverse repo rate.

The central bank retained key policy repo rate as well as reverse repo rate unchanged with continuing accommodative stance.

Rally was witnessed across sectors with Bank, Financial Services, Metal and IT indices being prominent gainers rising more than 1 percent each.

The Nifty50 formed bullish candle which resembles Hanging Man kind of pattern on the daily charts. Experts feel the index needs to decisively surpass 20-day moving average to extend uptrend in coming sessions, till then there could be rangebound and volatile trade.

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

The volatility declined further, indicating a bit of stability in the market as two key events (RBI policy and Union Budget) are behind us. India VIX, which measures the expected volatility in the market, dropped 4.5 percent to 17.71 levels.

Also read – Gainers & Losers: 5 stocks that moved the most on February 10

The Nifty50 after initial correction up to 17,427 rebounded gradually after the policy decision and extended to hit a day’s high of 17,639. The index closed at 17,605.80 with 142 points or 0.81 percent gains.

“Albeit Nifty50 rallied in response to dovish RBI policy, by the end of the day, it registered a Hanging Man kind of formation which usually suggests exhaustion of short-term upswing. Moreover, at an intraday high of 17,639 levels, it tested its 20-day moving average and witnessed marginal pullback from day’s high sending a message that the medium-term trend is still down,” said Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.

He feels unless this counter conquers the said average further strength in the near term shall not be expected. “If it closes above 17,640 then it can initially extend the strength towards 17,794 levels.”

Contrary to this, “if this counter trades below 17,427 levels then it can come under selling pressure on an intraday basis with initial targets placed in the zone of 17,339 – 17,306 levels, said Mazhar Mohammad who advised short-term traders to remain neutral on the index.

Also read – Market gains for the third day, here are the 4 factors fuelled the rally

On option front, maximum Call open interest stood at 18000 then 17500 strike while maximum Put open interest witnessed at 16500 then 16000 strike. Marginal Call writing was seen at 17600 then 17900 strike while Put writing was seen at 17600 then 17500 strike.

The abovementioned option data pointed towards an immediate trading range of 17,350 to 17,700 on the Nifty50.

The broader markets also gained with the Nifty Midcap 100 and Smallcap 100 indices rising third of a percent and half a percent, respectively.

Bank Nifty opened positive at 38,801 and headed above 39,000 to hit a day’s high of 39,197.20 aided by HDFC Bank, Federal Bank, Kotak Mahindra Bank, SBI and Axis Bank. The index climbed 400.60 points to close at 39,010.90 and formed a bullish candle on daily scale with long shadows.

“It has to hold above 38,850 levels, to witness an up move towards 39,250 and 39,500, whereas support is seen at 38,500 followed by 38,250 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

On stocks front, bullish setup was seen in Jindal Steel, LIC Housing Finance, NMDC, Infosys, Tata Steel, Federal Bank, HDFC Bank, Grasim, Tata Motors, JSW Steel, Kotak Mahindra Bank and PVR while weakness was seen PNB, Ambuja Cements, Hindustan Aeronautics, Zee Entertainment, Jubilant Foodworks and Gail, he added.

Disclaimer: The views and investment tips expressed by investment experts on are their own and not those of the website or its management. advises users to check with certified experts before taking any investment decisions.