The Nifty50 which opened on a slightly somber note tracking muted trend seen in other Asian markets managed to recoup losses and reclaimed its crucial resistance level of 10,800 on Friday. The index formed a bullish candle which closely resembles a ‘Hanging Man’ or an Inside Bar kind of pattern on daily charts.
A ‘Hanging Man’ is a single candlestick pattern and is considered a reversal pattern. It signals a market high and is classified as a Hanging Man only if it is preceded by an uptrend and is seen after a high.
Inside Bar is a two-candlestick pattern in which the inside bar or the most recent candle is smaller and is within the high and low range of the prior bar which is also known as the mother bar.
The Nifty50 which opened at 10,784 rose to an intraday high of 10,815. Bears pushed the index to an intraday low of 10,752 before pushing the index above 10,800. The Nifty50 closed 13 points higher at 10,805.
On a weekly basis, the S&P BSE Sensex rose 0.8 percent while the Nifty50 witnessed a rise of 1.05 percent. Broader market outperformed as the BSE Midcap index rose 3.2 percent while the S&P BSE Small-cap index closed 2.8 percent higher.
Most experts feel that for bulls to regain control, Nifty50 has to close above 10,838-10,930 levels. However, a breach of 200-DMA placed around 10,750 could fuel the selling pressure with an initial downside target of 10,560.
“The Nifty50 registered indecisive formation, after moving in an extremely narrow range of 63 points, which resembles a Hanging kind of formation Man hinting a pause in the ongoing short-term uptrend whereas a strong bullish candle is witnessed on weekly charts,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“However, weakness can be expected to emerge in the index on a breakdown below its 200-Day moving average (10,756) which appears to be acting as support for last two sessions as Nifty bounced back after testing the said average. On the upsides momentum shall pick up only on a close above 10838 levels,” he said.
Mohammad further added that in that scenario the rally can initially get extended up to 10941 levels, and on the downsides decisive breach of 10750 levels shall accentuate selling pressure with an initial target of 10560 levels.
At this juncture as the market looks ripe for a breakout in either of the direction traders are advised to maintain a neutral stance and initiate bets in the direction of a breakout.
On the options front, maximum Put OI is placed at 10000 followed by 10200 strikes while maximum Call OI is seen at 11000 followed by 10900 strike.
Put writing is seen at 10800 followed by 10700 strikes while Call writing is seen at 11000 strikes. Option band signifies a trading range in between 10650 to 10929 zones.
“The Nifty traded in an extremely narrow range and ultimately formed an Inside bar on the daily chart. For the last couple of sessions, the index seems to be forming a distribution near the 78.6% retracement of the previous fall,” Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas told Moneycontrol.
“The daily chart shows that the index respected the trendline hurdles for the second consecutive day. The overall structure suggests that the bears are warming up before the next downward leg starts,” he said.
Chavan further added that from a trading perspective, one can initiate a fresh short position with a reversal above the recent high of 10,941. A key target area on the downside will be at 10400-10333 with an intermediate support zone at 10700-10680.
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