Technical View: Nifty forms ‘Hanging Man’ kind of pattern; could face resistance at 10,365

The Nifty50 which started on a buoyant note on Monday reclaims 10,300 level in the opening tick but failed to build on the momentum as the index saw wild swings on either side.

The Nifty made a bullish candle which looked like a ‘Hanging Man’ kind of pattern. The index has been making higher highs and higher lows from last three trading sessions.

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 market witnesses a significant selloff in the trading session just like we saw in Monday’s trading session but still manages to recoup some of the losses and closes near the opening level.

The Nifty50 which opened at 10,310.50 rose to an intraday high of 10,329 which made a small upper shadow, but bears quickly took control and pushed the index towards 10,282 which made a long lower shadow on the daily charts.

The bulls took control and pulled the index back above 10,300 towards the closing trade. The Nifty50 finally ended 56 points higher at 10,322 on Monday.

The index is likely to face some resistance around 10,350-10365. Investors are advised to pare their leverage bets and build long positions only when Nifty closes comfortably above 10350-10365 levels on closing basis.

“It appeared to be the day of consolidation on the bourses as Nifty50 witnessed a narrow range bound move of 47 points which depicted small Hanging Man kind of formation. This kind of narrow range move may not augur well for bulls as Nifty50 is staring at multiple resistance points placed between 10332 – 10365 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Hence, it looks prudent to go for part profit booking and traders are also advised to prune down their leveraged bets around 10350 levels and consider a fresh entry on a close above 10365,” he said.

India VIX moved up by 3.49 percent at 14.14. A jump in volatility even after the market up move is giving the sense of volatile move in next coming sessions. VIX has to cool down if it has to hit the new high territory.

On the options front, maximum Put open interest is seen at 10000 followed by 10100 strikes while maximum Call OI was seen at 10500 followed by 10400 strikes.

Fresh Put writing was seen at 10100 and 10200 strikes while fresh Call writing was seen at 10400 strikes. “Option band suggests a shift of the support to higher zones but fresh Call writing at 10400 could restrict its upside momentum,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The Nifty index continued its up move for the third consecutive sessions and is now headed towards 10330 zone. It made a Bullish candle on the Daily chart and closed with the gains of around 55 points,” he said.

Taparia further added that the index has to continue to hold above 10250 zones to extend its up move towards 10409 then 10490 levels while on the downside supports are seen at 10178 then 10150.