Option band signifies a trading range of 11,700-12,100, experts said
Nifty took a breather on May 28 after a sharp rally in the last two sessions but still managed to end at record closing high amid consolidation.
The index opened on a positive note at 11,958.35, which was also an intraday high but after few minutes of trade, slipped into the red and traded with a negative bias for the most part of the session to hit a day's low of 11,864.90.
However, it gained some strength in late trade and closed 4 points higher at 11,928.75, forming 'Hanging Man' kind of pattern on daily charts.
A Hanging Man is a bearish reversal candlestick pattern that is usually formed at the end of an uptrend or at the top (around 771-point rally from its recent low of 11,157 recorded on May 15). 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 suggest continuing with a buy-on-decline strategy in the market. They added that the rangebound move is expected to continue in coming sessions.
"Albeit Nifty closed in positive terrain for the third session in a row, it registered a Hanging Man kind of formation suggesting exhaustion in the ongoing upward momentum. Hence, in the next trading session if the said index slips below 11,866 then it can come under selling pressure," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said current upmove of last three sessions still looks like an upward corrective reaction to the big reversal candle witnessed from the highs of 12,041 registered on May 23.
Hence, the market appears to be in the process of forming a short term top around 12,000 as upsides also appear to be limited unless a fresh breakout is witnessed beyond 12,041, he added.
Therefore, for time being he advised traders to avoid long positions in the index.
For Nifty options, maximum Put open interest (OI) was at 11,000 followed by 11,700 while maximum Call OI was at 12,500 followed by 12,000. Put writing was at 11,900 followed by 11,750 while minor Call writing was seen at 11,900 then 12,000.
Option band signifies a trading range of 11,700-12,100, experts said.
Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services also said the Nifty index formed a 'Hanging Man' candle on the daily scale.
Now it has to continue to hold above 11,850 to extend its move towards 12,000 then 12,040 while support is seen at 11,761, he added.
Bank Nifty opened positive at life high of 31,712 but failed to hold that level and remained volatile throughout the session. The index closed 49.75 points lower at 31,597.90.
It has been making higher lows from last eight consecutive sessions and managed to recover from lower levels to form a 'Hanging Man' candle on the daily scale.
"Now Bank Nifty has to hold above 31,313 to extend its move towards new life-time high of 32,000 then 32,250 levels while major support exists at 31,000 then 30,500 zones," Chandan Taparia said.
