Technical View | Nifty forms Hammer candlestick, has to hold 15,183 for upmove


The Nifty finally closed in the green after six sessions on June 20 but the mood in the broader space continues to be.

The index opened higher at 15,334.50 and hit the day’s high of 15,382. In a volatile trade, it slipped to the day’s low of 15,191 but managed to gain the lost ground to end 57 points higher at 15,350.

There was no respite for the broader market. The Nifty midcap 100 and smallcap 100 indices corrected 2.3 percent and 3.2 percent, respectively.

Experts say the market could be waiting for US Federal Reserve chairman Jerome Powell’s testimony later this week after the central bank hiked the interest rate by 75 bps. It also signalled another 50-75 bps hike in the next policy meeting after May inflation spiked to a 41-year high.

The Nifty formed a Hammer candlestick on the daily charts, a bullish reversal pattern that is formed after a decline. The index corrected more than 7 percent in the previous six sessions.

The pattern consists of no upper shadow, a small body, and long lower shadow. The long lower shadow signifies the market bounced back after testing its support, where demand is located.

The index defended June 17 low of 15,183, indicating that it would act as a support for the market in the coming days. If the index holds the level, it can rise to up to 15,600, experts said.

Sentiment indicator Stochastic showed positive crossover and the relative strength index (RSI) also flattened on June 20, indicating a bit more recovery.

“Advance-decline ratio sharply skewed in favour of bears, but certain positive factors cropped up on lower time frame charts in the form of positive divergences apart from momentum oscillators generating buy signals,” Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said, adding the Nifty managed to defend last Friday’s low of 15,183 levels.

It appears that the Nifty is positioning itself for a pullback rally, he said. It can stage a relief rally for an initial target of 15,600 as long as it sustains above 15,181.

A close below 15,181 can extend the weakness towards 14,900, the market expert said.

India VIX, which indicates expected volatility in the market, was down 1.51 percent to 22.41. Volatility is high, which will lend an upper hand to the bears in a tug of war, experts said.

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

Call writing was witnessed at 15,500 strike followed by 15,700 strike, while there was a minor Put writing at 15,200 strike then 15,000 strike.

The data indicates that the immediate trading range for the Nifty will be 15,100-15,700.

The banking index

The Bank Nifty opened positive at 32,873 and gained strength after taking support at 32,400. It moved in a 500-point range but failed to surpass the 33,000-mark.

The index formed a small-bodied bearish candle on the daily frame with a long lower shadow and closed with losses of 58 points at 32,685.

“Till it holds below 33,000 mark, weakness may be seen towards 32,250 and 32,000 levels, whereas hurdles are placed at 33,333 and 33,500 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, said.

Positive setup was seen in Godrej Consumer Products, HDFC, HUL, Dabur India, Britannia Industries, Asian Paints, Apollo Hospitals Enterprises, HDFC Bank, Infosys, Nestle India, Alkem Labs and ITC.

However, weakness was seen in Vedanta, Bandhan Bank, Tata Power, NALCO, BHEL, GAIL, IDFC First Bank, Tata Chemicals, InterGlobe Aviation, Deepak Nitrite, Jindal Steel & Power, Tata Steel, Manappuram Finance, Bank of Baroda, MCX, M&M Financial, Piramal Enterprises and UPL, he added.

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