Tech View: Nifty50 forms an Inverted Hammer; shows signs of bottoming out
NEW DELHI: Everything looked hunky-dory in the first half of Tuesday’s session. But in the final two hours, domestic equity benchmark Nifty50 slumped from the day’s high of 9,218 – the level evolving as a major resistance for the index in a weak market – and closed a tad above the 9,100 mark.
As one technical analyst said, the session was nothing sort of a nightmare for traders.
On the daily chart, the Nifty50 formed a pattern similar to the ‘Inverted Hammer’. The index is likely to see some more correction before it bottoms out.
“Usually, if an ‘Inverted Hammer’ forms in a downtrend, the probability of the market bottoming out is higher. The selloff from intraday high can be attributed to scepticism about the sustainability of the rally and this disbelief resulted in a long upper shadow,” said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in.
“Our wave counts are also suggesting that the market is nearing the end of its corrective pattern, and it should ideally bottom out slightly below the 9,019 level from where a new leg of uptrend should unfold,” he said.
The index opened firm and kept rising until it hit the 9,218 mark. This was the all-time high level for the Nifty50 till sometime back. Selling emerged at this level and the index closed the day at 9,105, down 34.15 points, or 0.37 per cent. This was lower than the index’s 13-day EMA level. The selloff has raised chances of further downside for the index towards the 9,000 mark.
“The intraday price movement was similar to a double-edged sword. It must have caught most of the traders on the wrong foot. Honestly speaking, the sharp decline was certainly not expected. The speed in which the market corrected in the second half was terrifying and literally it was a confidence-shattering move.,” said Sameet Chavan, Chief Analyst- Technical & Derivatives at Angel Broking.
Chavan believes traders should now keep a close eye on the 9,060 level, which is the 161 per cent retracement of the small rally from 9,120 to 9,217 level.
Chandan Taparia, derivative & technical analyst at Motilal Oswal Securities, believes if the Nifty50 holds below the 9,165 mark, it may drag the index towards the 9,020-9,000 zone.
The 50-stock pack faces resistance at 9,191 and 9,218 levels, Taparia said.
As one technical analyst said, the session was nothing sort of a nightmare for traders.
On the daily chart, the Nifty50 formed a pattern similar to the ‘Inverted Hammer’. The index is likely to see some more correction before it bottoms out.
“Usually, if an ‘Inverted Hammer’ forms in a downtrend, the probability of the market bottoming out is higher. The selloff from intraday high can be attributed to scepticism about the sustainability of the rally and this disbelief resulted in a long upper shadow,” said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in.
“Our wave counts are also suggesting that the market is nearing the end of its corrective pattern, and it should ideally bottom out slightly below the 9,019 level from where a new leg of uptrend should unfold,” he said.
The index opened firm and kept rising until it hit the 9,218 mark. This was the all-time high level for the Nifty50 till sometime back. Selling emerged at this level and the index closed the day at 9,105, down 34.15 points, or 0.37 per cent. This was lower than the index’s 13-day EMA level. The selloff has raised chances of further downside for the index towards the 9,000 mark.
“The intraday price movement was similar to a double-edged sword. It must have caught most of the traders on the wrong foot. Honestly speaking, the sharp decline was certainly not expected. The speed in which the market corrected in the second half was terrifying and literally it was a confidence-shattering move.,” said Sameet Chavan, Chief Analyst- Technical & Derivatives at Angel Broking.
Chavan believes traders should now keep a close eye on the 9,060 level, which is the 161 per cent retracement of the small rally from 9,120 to 9,217 level.
Chandan Taparia, derivative & technical analyst at Motilal Oswal Securities, believes if the Nifty50 holds below the 9,165 mark, it may drag the index towards the 9,020-9,000 zone.
The 50-stock pack faces resistance at 9,191 and 9,218 levels, Taparia said.
