Tech view: Nifty50 forms Hanging Man pattern, signalling exhaustion
, ETMarkets.com|
Jan 25, 2018, 05.19 PM IST
NEW DELHI: The Nifty50 snapped a six-day winning streak on Thursday to settle the January series futures & options contracts at 11,069. During the session, the index formed a Hanging Man pattern on the daily chart, while making sure it holds on to the 11,000 mark, which is seen as an immediate support for the index.
A 'Hanging Man' is a bearish candlestick pattern, which is formed at the end of an upward trend. In this formation, the market witnesses significant selloff at the start but manages to recoup some of the losses and closes near the opening level at close.
But the bulls are unlikely to give in so easily, say experts. "How the market behaves over the next three sessions will be crucial," said Sameet Chavan of Angel Broking.
"We have been underlining the importance of the 11,100 level, as it coincides with the 161 per cent price extension of the rally seen during 2008-10. Although, recently, there has not been much respect to any level, since 161 per cent is considered an important ratio as per the 'Fibonacci series' and with a major event around the corner, it's important to draw attention to this point," Chavan said.
At close, the Nifty50 was down 16.35 points, or 0.15 per cent, at 11,069. Supply pressure was seen at higher levels, but the decline was bought into.
"The Nifty50 registered a Hanging Man kind of formation, suggesting exhaustion in the market. As the momentum oscillators on the lower time frame charts generated a sell signal, the market should ideally remain under pressure and trade sideways with a negative bias over the next few sessions," said Mazhar Mohammad of Chartviewindia.in.
That said, the momentum looks strong on the longer-time horizon charts and the market should find support in the gap zone between 10,994 and 10,975 hit on January 23," Mohammad said.
"The index has to decisively move above the 11,111 level to extend the rally towards 11,200-11,250 levels, but if it holds below 10,990, it could see a decline towards the 10,888 level, said Chandan Taparia of Motilal Oswal Securities.
Since the momentum is very bullish and the internal strength is in favour of the bulls, it will take a lot of effort for the bears to make a follow-up move, said Mustafa Nadeem, CEO, Epic Research.
A 'Hanging Man' is a bearish candlestick pattern, which is formed at the end of an upward trend. In this formation, the market witnesses significant selloff at the start but manages to recoup some of the losses and closes near the opening level at close.
But the bulls are unlikely to give in so easily, say experts. "How the market behaves over the next three sessions will be crucial," said Sameet Chavan of Angel Broking.
"We have been underlining the importance of the 11,100 level, as it coincides with the 161 per cent price extension of the rally seen during 2008-10. Although, recently, there has not been much respect to any level, since 161 per cent is considered an important ratio as per the 'Fibonacci series' and with a major event around the corner, it's important to draw attention to this point," Chavan said.
At close, the Nifty50 was down 16.35 points, or 0.15 per cent, at 11,069. Supply pressure was seen at higher levels, but the decline was bought into.
"The Nifty50 registered a Hanging Man kind of formation, suggesting exhaustion in the market. As the momentum oscillators on the lower time frame charts generated a sell signal, the market should ideally remain under pressure and trade sideways with a negative bias over the next few sessions," said Mazhar Mohammad of Chartviewindia.in.
That said, the momentum looks strong on the longer-time horizon charts and the market should find support in the gap zone between 10,994 and 10,975 hit on January 23," Mohammad said.
"The index has to decisively move above the 11,111 level to extend the rally towards 11,200-11,250 levels, but if it holds below 10,990, it could see a decline towards the 10,888 level, said Chandan Taparia of Motilal Oswal Securities.
Since the momentum is very bullish and the internal strength is in favour of the bulls, it will take a lot of effort for the bears to make a follow-up move, said Mustafa Nadeem, CEO, Epic Research.
