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Technical View: Nifty forms Hanging Man pattern, 15,850–15,600 likely range for coming days

Considering the volatility, traders should wait for more cues before initiating directional trade in the index, Mazhar Mohammad of Chartviewindia has said.

June 14, 2021 / 05:30 PM IST

The Nifty50 remained volatile and fell nearly 200 points during the day following a sell-off in Adani group company stocks but the index turned positive in the last hour to close at another record high on June 14.

Shares of Adani group companies took a beating on reports of the National Securities Depository Ltd (NSDL) freezing three Foreign Portfolio Investors' accounts that own shares in four of the listed Adani firms emerged. Later in the day, the group said the reports were erroneous and the accounts had not been frozen. NSDL data, however, showed that the accounts were indeed frozen.

The Nifty formed Hanging Man pattern on the daily charts. Considering the technical structure, experts expect the index to remain range-bound in coming sessions.

A Hanging Man is a bearish reversal candlestick pattern 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.

Considering the volatility, traders should wait for more cues before initiating directional trade in the index, said Mazhar Mohammad, Chief Strategist –Technical Research & Trading Advisory at Chartviewindia.in.

Close

The Nifty50 opened flat at 15,791.40 and fell sharply to hit the day's low of 15,606.50. In initial half an hour of the trade, the index started recovering to gain in the last hour of trade. It closed at 15,811.90, up 12.50 points.

"The Nifty50 made a dramatic recovery from intraday lows of 15,606 levels, which resulted in a Hanging Man kind of indecisive formation with long lower shadow. Despite this recovery of around 200 points, bullish sentiment failed to spread in the broader markets as advance decline ratio remained skewed in favour of bears," Mohammad said.

Moreover, "considering overall technical picture across the time frames, upsides from current levels appear to be limited and by virtue of that fact Nifty shall ideally carve out a trading range between 15,850–15,600 levels for several days going forward," he said.

It would be prudent for index traders to create fresh longs on dip, preferably at lower end of the trading range rather than chasing the index at current level, Mohammad said.

On the downside, weakness shall get confirmed on a close below 15,600, which may trigger a sharp correction in the index, he said.

India VIX, which measures volatility in the market and had been falling for the last six consecutive weeks, moved up 4.36 percent from 14.10 to 14.71 levels.

"Lower volatility indicates a bullish market bias but a spike in volatility might give volatile swing in the market even after being at the life-time high zones," said Chandan Taparia of Motilal Oswal.

On the options front, maximum Put open interest was seen at 15,500 followed by 15,000 strike, while maximum Call open interest was seen at 16,000 followed by 16,500 strike. Minor Call writing was seen at 15,800 then 16,200 strike, while minor Put writing was seen at 15,500 then 15,700 strike. Option data indicated an immediate trading range for the Nifty50 at 15,500 to 16,000 in the coming sessions.

The Bank Nifty opened negative at 34,936.55 and witnessed a sharp decline to 34,374 in the initial hour of the session and then saw a strong recovery in the later part of the day. The banking index closed the session with losses of 96.80 points at 34,950.60.

It formed a Dragonfly Doji candle on daily scale with long lower shadow indicates that declines are being bought smartly.

"The Bank Nifty has to hold above 35,000 to witness an upmove towards 35,250 and 35,500 levels, while on the downside, support is seen at 34,750 and 34,500 levels," said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

On stocks front, a bullish setup was seen in Torrent Pharma, Godrej Consumer Products, ICICI Prudential, Muthoot Finance, Reliance Industries, Tata Motors, ONGC, SAIL, Power Grid, Divis Labs, Bajaj Finance, Wipro, Bata India, Cipla and Dabur. Weakness was seen in BHEL, Adani Enterprises, DLF, Sun TV Network, Siemens, Kotak Mahindra Bank and RBL Bank, he added.

Disclosure: MoneyControl is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

 
Sunil Shankar Matkar
first published: Jun 14, 2021 05:30 pm

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