Kshitij Anand Moneycontrol News
After a blockbuster rally last week, Indian market consolidated in a narrow range on Monday. The Nifty50 slipped below its crucial support placed at 10550 to form a ‘Hanging Man’ kind of pattern on the daily charts.
A Hanging Man is a bearish reversal candlestick pattern which is usually formed at the end of an uptrend or at the top. In a perfect 'Hanging Man' pattern either there will be a small upper shadow or no upper shadow at all, a small body and long lower shadow.
The Nifty50 which opened at 10,558.75 rose marginally to hit its intraday high of 10,558.80 which resulted in no upper shadow for the index. The bears controlled the D-Street from the word ‘go’ and pushed the index below 10,500 in intraday trade.
However, bulls managed to push the index back above 10,500 levels towards the closing which is a positive sign. The Nifty50 finally closed 29 points down at 10,524.
Crucial support for the index is placed at 10440, and below that at 10,200 levels while on the upside, Nifty50 is likely to face stiff resistance at 10,600-10,700 levels, suggest experts.
“It appears to be a day of consolidation on the bourses as Nifty50 remain range bound with a move of 81 points before signing off the session with a ‘Hanging Man’ kind of formation. Interestingly, Nifty50 after hitting the low of 10004 is alternating between a negative and a positive close,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“Besides the magnitude of the price range on rallies is diminishing pointing towards dwindling momentum as some of the momentum oscillators on lower time frame charts already generated fresh sell signals. Usually, Hanging Man formation accompanied with sell signals on momentum oscillators will trigger a short-term correction,” he said.
Mohammad advise traders to remain cautious on the long side of the trades as a negative close in the next session which may trigger a short-term correction which shall get accentuated further on a close below 10440 levels. Contrary to this a close above 10600 may initially extend this pullback towards 10710 levels.
India VIX moved up by 6.87 percent at 19.48 levels. VIX has to go down below 17-16 zones to confirm the short-term reversal and a decent bounce back after the sharp cut of last two months.
On the options front, maximum Put OI is placed at 10,000 followed by 10,200 strikes while the maximum Call OI is seen at 11,000 followed by 10,800 strikes.
Put writing is seen at 10500 followed by 10600 strike while Call writing is seen at 11000 followed by 10600. Option band signifies an immediate range from 10450 to 10650 zones.
“The Nifty index managed to respect its previous day’s low and remained range bound for the most part of the trading session to settle above 10500 zones. It formed a bearish candle which also resembles a Hammer-like pattern on the daily scale. Small lower shadow suggests that decline is been bought into the market,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“The index has to continue to hold above 10450 zones to extend its up move towards 10650 -10750 zones while on the downside multiple supports are seen at 10450 then 10380 levels,” he said.
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