Technical View: Nifty forms Hanging Man pattern, likely to hit 13,000-mark soon

The Nifty 50 started off the truncated week on a positive note and ended at another record closing high on November 17, backed by banking & financials, auto and metals stocks. Another vaccine development news lifted global sentiment, outweighing concerns related to an increase in virus cases and tighter restrictions in the western world.

The index remained positive throughout the session but formed a small-bodied bearish candle (as closing was lower than opening levels), which resembles Hanging Man kind of pattern on the daily charts.

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.

Experts expect Nifty to touch 13,000-mark if it holds 12,797 levels in coming sessions.

Mazhar Mohammad of Chartviewindia.in advised traders to refrain from shorting unless some signs of weakness are visible.

The Nifty50 opened higher at 12,932.50 but erased some gains in late morning deals to hit a day's low of 12,797.10. The index gained strength again in the afternoon and hit an intraday high of 12,934.05. It ended at fresh record closing high of 12,874.20, up 93.90 points.

"Bulls continued their relentless rally into the NewSamvat by registering yet another new life time high before signing off the session with a Hanging Man kind of candle formation whch is a cause for concern," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

Moreover this formation, which usually suggest exhaustion of bulls and forms around potential turning points, is accompanied with intraday bearishness as Nifty failed to add on to the strong gap up opening and closed way below its opening point of 12,932 raising doubts about further strength in the ongoing upmove, he said.

In next trading session, index needs to sustain above 12,797 levels as failure to do so may confirm some sort of weakness among bulls, he feels.

However, according to him, if the Nifty sustains above 12,797 levels, it can make an attempt to test 13,000 mark in next couple of trading sessions whereas if index closes below 12,797 then it may trigger corrective downswing.

India VIX was up by 3.52 percent from 19.13 to 19.80 levels.

Option data indicated that the Nifty could move in a wider trading range of 12,600 to 13,200 levels in coming sessions.

On option front, maximum Put open interest was seen at 12,000 followed by 12,500 strike while maximum Call open interest was at 13,000 followed by 13,500 strike. Marginal Call writing was seen in 13,100 and 13,300 strike while Put writing was seen at 12,800 then 12,500 strike.

Bank Nifty opened positive at 28,792.25 and headed higher to hit an intraday high of 29,239.25 by surpassing recent swing high of 29,000. It remained consolidative in the first half but saw positive movement in the latter part of the day.

The index outperformed Nifty50, rising 587 points or 2.05 percent to close at 29,181.30 and formed a bullish candle on daily scale. The index continued its positive streak for the third consecutive sessions.

"Now Bank Nifty has to continue to hold above 29,000 to witness an upmove towards 29,500 and 29,800 while on the downside support is seen at 28,700 and 28,500 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Positive setup was seen in Tata Steel, Tata Motors, SBI, ICICI Prudential, MRF, Cummins India, Axis Bank, Cholamandalam Investment, RBL Bank, Siemens, HDFC Bank and Maruti Suzuki while weakness was seen in NTPC, Sun TV Network, Lupin and HCL Technologies, he added.