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Technical View | Nifty forms 'Hanging Man' on weekly scale, directionless trade likely to continue

The Nifty50 closed with moderate gains and formed a small-bodied bearish candle on the daily charts as the closing was lower than opening levels, while there was also a bearish candle formation on the weekly scale which somewhat resembles a Hanging Man kind of pattern. Hence, the index is expected to be directionless in coming sessions and remained within a range of 17,350-17750, experts said.

August 26, 2022 / 05:27 PM IST

The Nifty50 remained volatile and rangebound for yet another session on August 26, the first day of the September series. In fact, the same trend continued after the correction from the recent swing high of around 18,000. The market participants may be waiting for the speech by Fed Chair Jerome Powell at Jackson Hole to get their further direction about rate hikes.

The index closed with moderate gains and formed a small-bodied bearish candle on the daily charts as the closing was lower than opening levels, while there was also a bearish candle formation on the weekly scale which somewhat resembles a Hanging Man kind of pattern. Hence, the index is expected to be directionless in coming sessions and remained within a range of 17,350-17750, experts said.

A Hanging Man is a bearish reversal candlestick pattern that is usually formed at the end of an uptrend or at the top. In a perfect 'Hanging Man' pattern, there will be a small upper shadow or no upper shadow at all, a small body and a long lower shadow.

The outperformance by broader markets continued due to positive breadth, as the Nifty Midcap 100 index rose 0.55 percent and Smallcap 100 index gained 0.7 percent. About 1,122 equity shares advanced against 838 declining shares on the NSE.

The Nifty50 lost more than one percent for the week, snapping five-week gains. On Friday, it opened sharply higher at 17,619 and climbed up to 17,686, but gradually amid volatility, it witnessed some profit booking and finally settled with 36 points gains at 17,559.

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"Albeit, the last three trading sessions of the price action is appearing like a consolidation move, the index seems to have lost its upward momentum with a near-term top present around 17,992 levels. Hence, in the near term index may remain directionless confining its move between 17,726 and 17,482 levels," Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.

Some strength can be expected if the index closes above 17,720 levels, but the weakness should be confirmed on a close below its 20-day SMA (simple moving average - 17,418) which bulls managed to defend in the current fall from the highs of 17,992 levels.

For the time being, the market expert advised traders to remain neutral on the long side but intraday traders can consider shorting below 17,480 for a modest target of 17,410 levels.

The volatility index India VIX fell by 6.92 percent to 18.21 levels, making the bulls a bit comfortable. But it needs to cool down below the 18 mark for market stability, experts said.

Given the rangebound trade for the last several sessions, the Options data continued to indicate that the trading range for the Nifty50 may range in between 17,000 to 18,000 levels in coming sessions.

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On the Option front, we have seen maximum Call open interest at 17,700 strike followed by 18,000 strike while the maximum Put open interest was seen at 17,500 strike followed by 17,000 strike. Call writing was seen at 18,000 strike then 18,300 strike while marginal Put writing was seen at 17,500 strike then 17,200 strike.

Bank Nifty also started off the September series on a positive note at 39,130 but traded in a consolidative manner throughout the day. It traded with less momentum and closed with gains of 36 points at 38,987.

The banking index has formed yet another bearish candle on the daily charts and negated its higher highs formation of the last three sessions. On the weekly frame, it formed a bullish candle but witnessed a high wave kind of pattern as it closed flat.

"Now it has to hold above 38,888 levels to make an up move towards 39,250 and 39,500 levels, whereas supports are seen at 38,750 and 38,500 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Aug 26, 2022 05:27 pm
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