Last Updated : Jun 14, 2018 05:15 PM IST | Source:

Technical View: Nifty forms a ‘Hammer’ like candle; 10,767 crucial for bulls

The Nifty50 hold on to its crucial support placed at 10800 levels and made a bearish candle which looked like a ‘Hammer’ like pattern on daily charts.

Bulls failed to remain in control of D-Street on Thursday largely led by weak global cues after the US Federal Reserve overnight raised key interest rates by 25 basis points.

The Nifty50 hold on to its crucial support placed at 10800 levels and made a bearish candle which looked like a ‘Hammer’ like pattern on daily charts.

A Hammer which is a bullish reversal pattern is formed after a decline while a Hanging Man is a bearish reversal pattern. A Hammer consist of no upper shadow, a small body, and long lower shadow.

The long lower shadow of the Hammer signifies that it tested its support where demand was located and then bounced back. The index bounced back near its crucial support placed around 10,770.

Investors are advised to remain cautious and a decisive breach of 10,767 on Friday could extend the decline while strong resistance is placed at 10,900-10,930 levels, suggest experts.

The Nifty50 which opened at 10,832 rose marginally to hit an intraday high of 10,833.70. It hit an intraday low of 10,773.55 before closing the day at 10,808, down 48 points.

“At this juncture, technical set up is looking somewhat neutral as Nifty50 recouped most of the intraday losses to register Hammer formation on candlestick charts despite witnessing a Gap down opening,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

“This kind of price action can also be a result of a kneejerk reaction to the negative global cues which by the end of the day failed to have a bigger negative impact on bourses. Hence, any follow-through buying in next trading session may reinstate the bullish sentiment once again whereas a close below 10,767 in next session shall confirm bearish formation paving the way for bigger correction,” he said.

Mohammad further added that based on larger trends as long as Nifty50 sustains below 10,930 levels the threat of big fall continues to loom large on the indices. “Hence, it looks inevitable for the bulls to register a breakout above 10,930 levels to usher in a sustainable upmove,” he said.

India VIX fell down by 4.31 percent at 12.09 levels. Bank Nifty has been forming small-bodied candle from the last couple of sessions indicate the absence of follow through on both the side. It has to continue to hold above 26,500 zones to witness an up move towards 26750, suggest experts.

On the options front, maximum Put OI is placed at 10,600 and 10,700 strikes while maximum Call OI is placed at 11000 followed by 10900 strikes.

“We have seen Put unwinding on all the immediate strikes while Call writing is seen at 10900 and 10800 strikes. Option data suggests a trading range in between 10700 to 10900 zones,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The Nifty closed negative and formed a small bearish candle on the daily scale while the weekly candle is forming a small-bodied candle with bigger higher shadows. Now, it has to continue to hold above 10,770 zones to extend its move towards 10,888 levels while immediate support exists at 10,770 then 10,720 zones,” he said.

Taparia further added that the index has been making higher highs - higher lows from the last three weeks and a hold above 10,770 which is very important if the index has to move higher.
First Published on Jun 14, 2018 04:50 pm
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