The Nifty which opened with a slight gap on the upside on Thursday witnessed selling in opening trade but bulls manage to bring back the index near its opening levels making a ‘Hammer’ like pattern on the daily charts.
A classic 'Hammer' is formed on the charts when the index trades significantly lower than its opening price for the most part of the trading day but then bulls manage to push the index near or above its opening level.
The pattern has no or a tiny upper shadow, a small body, and a long lower shadow. The body is at least half the size of the tail. It is a bullish reversal pattern and often signifies that the market could be nearing a bottom.
The Nifty index managed to hold its immediate support of 9,850 and headed towards 9,925 mark which is an important resistance level for the index. The Nifty closed above 9,900 zones and gave a highest daily close in the last 15 trading sessions.
Value buying signals a capitulation by sellers to form a bottom accompanied by a price rise, indicating buying at lower levels. The index has been respecting its support trend line and now Nifty has to cross 9928-9950 levels for fresh up move towards 10,000 levels.
The Nifty50 opened at 9905 and closed at 9917.90 on Thursday. It slipped to an intraday low of 9,856.95 thus resulting in a long lower shadow and a high of 9925.10 which was close to the opening level and formed a small upper shadow.
“The Nifty formed a Hammer candle with the bigger lower shadow which indicates that decline is being bought in the market. It has been respecting to its rising support trend line by connecting the swings lows of 9075, 9448 and 9685 mark,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“It has to cross and hold above 9,928-9,950 zones to witness a fresh move towards 10020 and 10050 while on the downside supports are seen at 9,850 and 9,820. The Nifty future closed negative by around 1 percent at 9917.90 on expiry to expiry basis compared to July settlement of 10,020.55,” he said.
On the options front, for the September series maximum Put OI is at 9700 strike while maximum Call OI is at 10000 followed by 10100 strike.
Option data suggests that supports are shifting higher while life time high of 10138 is still going to be a stiff resistance zone to commence any upside movement in the market, suggest experts.
India VIX fell down by 7.27 percent at 11.95 and a decline in volatility has supported the index to get a stable move with follow up buying interest.
The Nifty settled near to its series VWAP of 9928 zones means bulls and bears both were at comfort zones but low rollover comparatively suggests that aggression is missing in the market by bulls post its pause in upside momentum.
“On the monthly charts, the Nifty50 registered a Hanging Man kind of formation on the Monthly charts as it signed off the August series suggesting pause of the strong momentum which is in place for the last 8 months,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in
“As this consolidation phase for the last couple of trading sessions is displaying equal power between bulls and bears traders are advised to watch out of breakout or breakdown points to draw clues about the future direction of the market,” he said.
Mazhar further added that upsides are looking limited and traders are advised to lighten up positions around 10,040 kinds of levels where as a breach of 9783 should ideally provide fresh shorting opportunity with lucrative targets on downsides.
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