The Nifty which started on a positive note came under pressure in morning trade on Wednesday but managed to close near its opening level supported by buying at lower levels. The index formed a ‘Hammer’ like pattern on charts which suggest formation of a bottom.
The Nifty formed a Hammer like the pattern on the daily charts after forming an inverted hammer like pattern or a bearish candle on Tuesday which is a positive sign. However, for the upside to continue, it still needs to surpass 9,133 on closing basis while a close below 9,020 could put intensify the pressure.
A perfect 'Hammer' pattern is formed when the index trades significantly lower than its opening price for the most part of the trading day but manages to close either above or lower to its opening price.
In the exact pattern, the size of the lower shadow should be a least twice the length of the body and the range between the highest and the lowest level should be relatively large. However, in Wednesday’s session, there was small upper shadow and the range was 45 points.
The Nifty index opened at 9,112.20 and rose to an intraday high of 9,120.50 and retraced nearly 45 points to touch its intraday low of 9075.15, but bounced back nearly 30 points to close flat at 9,103.50.
"The market experienced a low volatility day. The Nifty index formed a Bullish Hammer candle on the daily chart. Hammer candle after the sharp correction on the previous session indicates that decline is being bought in the market," Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.com.
“However, it closed flat to negative and continued its losing streak for fifth consecutive sessions and now needs to hold above 9,133 to witness an up move towards 9,165 and 9,218. On the downside it has support at 9,090 and then towards 9,050 zone,” he said.
The index closed above its crucial resistance level of 9,100 for the second day in a row on Wednesday, which is hinting at bottoming out formation.
The price action witnessed on Wednesday is certainly encouraging and looks like bulls are seriously putting efforts in pulling the markets out of the woods despite panic kind of sell-off witnessed in Tuesday’s trading session owing to geopolitical concerns.
"The Nifty registered Hammer kind of formation on the charts suggesting that bulls are working to hammer out a bottom in the last two trading sessions," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.com.
“In Elliot Wave parlance though we presumed that corrective structure is unfolding in the form of an Expanded Flat now it seems if Nifty bottoms out without getting past 9019 kind of levels, then this corrective structure should pave the way for triangular formation which means consolidation for couple of days more before witnessing a breakout,” he said.