The Nifty50 witnessed some selling pressure after hitting a record high of 10,461.70 on Friday but bulls managed to push the index towards its opening level towards the close of the trade making a ‘Hanging Man’ kind of pattern on the daily candlestick charts.
A Hanging Man is a bearish reversal candlestick pattern that is formed at the end of an uptrend. In a perfect 'Hanging Man' pattern, there will be a small or no upper shadow. It would also have a long lower shadow with a small body.
The Nifty50 index continued its up move and registered a fresh lifetime high of 10461. It managed to hold the support of 10380-10400 zones and given a strong weekly closing near to high levels which is a bullish sign.
Formation of a Hanging Man candle in the uptrend indicates a possible reversal or a top. Although there are no specific signs that the trend will reverse hence traders should remain long with a strict stop below 10,400 on the closing basis.
On Friday, Nifty opened with a gap on the higher side at 10,461.55 and rose to a record high of 10,461.70 but then bears took control of the index and pushed it towards its crucial support level of 10,400.
The index hit an intraday low of 10,403.60 but the bulls took control and pushed the index towards its opening level. The index closed 28 points higher at 10452.50. The closing level was lower than the opening level lead to a formation of a bearish candle on the daily charts.
“Albeit Nifty50 appears to have recovered from intraday lows of 10403, by the end of the session it witnessed a Hanging Man kind of formation which yet times may result in a pause of the rally going forward,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“However, when we look at different technical parameters it looks it will be too early to call for such a pause in the ongoing up-move unless the market registers anther range bound day in the immediate trading session,” he said.
Mohammad further added that upsides in the near-term can’t be ruled out and traders are advised to trail their stop below 10,400 levels on the closing basis and look for 10,600 kind of levels.
India VIX fell down by 0.80 percent at 11.91 and lower volatility is supporting to overall bullish undertone with buying interest on every small decline.
On the options front, maximum Put OI is seen at strike prices 10,000 followed by 10,200 while maximum Call OI was seen at 10500 followed by 10400 strikes.
Fresh Put writing at 10400, 10300 and 10000 strikes while fresh Call writing is seen at 10600 then 10800 strikes.
“Intact Call writing at 10500 is acting as an immediate barrier while fresh Call writing suggests an extension of this up move. Now, Call unwinding in 10500 strikes could give more conviction for an upside move,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“The index has to continue to hold above 10380-10400 zones to witness an up move towards 10550 and even higher levels while on the downside supports are seen at 10380 then 10350,” he said.Taparia is of the view that the index has been making higher top – higher bottom formation on the weekly chart and till it doesn’t negate this formation index is likely to hold its strength.