Technical View: Trend remains positive but Hanging Man pattern signals caution in Nifty, Bank Nifty snaps 6-day rally

Nifty Uptrend

The relentless rally continued in the benchmark Nifty 50, which gained seven-tenths of a percent, driven by technology—the previously lagging sector. From the Tariff bottom, the upward journey has been largely led by the banking and financial services sector. Thus, sectoral rotation has supported the market's strength.

Overall, the trend remains positive, given the continuation of the higher highs–higher lows formation, possibly taking the Nifty toward 24,545 in the short term. However, participants need to exercise some caution, as the rally so far has been swift. Moreover, a Hanging Man-like pattern formed at the highs—a bearish reversal signal that will only be confirmed in the following session. Experts added that the immediate support lies in the 24,100 zone.

The Nifty 50 opened higher at 24,358, but gave up all gains after the initial hour, testing an intraday low of 24,120. However, it quickly recovered and trended higher through the rest of the session, eventually closing at 24,329, up 162 points. The index formed a small bearish candle with a long lower shadow, resembling a Hanging Man pattern on the daily charts.

“This pattern needs to be confirmed by Nifty moving below the low of the pattern (at 24,120) to consider it a reversal. However, sometimes such market action results in an uptrend continuation pattern,” said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

According to him, the underlying trend of the Nifty remains positive. “Though the market is facing hurdles and volatility at the highs, there is still no confirmation of a reversal or exhaustion at the top. The next upside levels to watch are around 24,550 and 24,800 in the near term. Immediate support is placed at 24,100,” he added.

As per the weekly options data, 25,000 is expected to remain a crucial resistance level for the Nifty 50, while support lies at 24,000. The maximum Call open interest was seen at the 25,000 strike, followed by 24,500 and 24,300, with the most significant Call writing at the 24,300 strike, followed by 25,100 and 24,350. On the Put side, the 24,000 strike holds the maximum open interest, followed by 24,200 and 23,500, with the most substantial Put writing at 24,200, followed by 24,300 and 24,250.

Bank Nifty

The Bank Nifty underperformed the benchmark Nifty 50, snapping a six-day rally and closing half a percent or 277 points down at 55,370 on profit booking, but still managing to defend the 55,000 mark. It had rallied 11.66 percent from April 11 until today’s record high of 56,099, before undergoing a correction.

The previous session’s Shooting Star-like pattern on the Bank Nifty received bearish follow-through in Tuesday’s session, forming a Marubozu candle. The open-high acted as strong resistance, sweeping the previous day’s high and closing near the prior session’s lows.

“This profit booking indicates a cooling of momentum, with a likely test of the previous all-time high at 54,467 as support. On the upside, 55,600 remains a key resistance zone,” said Anshul Jain, Head of Research at Lakshmishree Investments.

Meanwhile, the India VIX, the volatility index, rebounded by 4.79 percent to 15.96 levels. This signals a note of caution for the bulls, as it has moved closer to the 16 mark.