Technical View: Nifty forms Hanging Man pattern, 12,770 crucial for further upside

The Nifty50 opened at record high levels and faced volatility during the day, but the rebound in the last couple of hours of trade helped the index to end at fresh record closing high on November 11.

Bulls continued their support for the eighth consecutive session and as a result, the index formed bullish candle which resembles a 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 (around 8.5 percent rally in 7-trading sessions). 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.

The consistent flow of FII money and buying in banking & financials, auto, FMCG, metals and pharma stocks pushed the market higher.

Experts feel the 12,770 would be crucial level to watch out for, if the index strongly surpasses the same then 12,850 can be possible on the Nifty in coming days.

As of now, except overbought readings on momentum oscillators, no other weak signs are visible on the charts, said Mazhar Mohammad of Chartviewindia.in. Hence, in the next trading session if bulls manage to push indices beyond 12,770 levels then the strength in Nifty shall get extended further towards 12,850 levels, he feels.

Therefore, he advised traders to remain neutral and wait for some signs of weakness before shorting.

The Nifty50 opened higher at 12,680.60 and witnessed some volatility during the day. The index touched an intraday high of 12,769.75 and low of 12,571.10, before signing off the session at 12,749.20, up 118.10 points.

"Albeit Nifty50 posted a strong show with smart recovery from intraday low of 12,572 levels, it registered a Hanging Man kind of formation on the candlestick charts which is usually found around potential turning points as trend nears exhaustion," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

Nevertheless, confirmation of weakness will occur if Nifty trades below 12,571 in next session which shall potentially trigger a short term downswing, he feels.

Moreover, based on long term trend analysis Nifty has critical resistance in the zone of 12750 – 12,800 levels, he said, adding this zone can be a potential turning point for the indices going forward.

India VIX increased further, up by 2.10 percent from 21.57 to 22.03 levels today.

Option data indicated that a wider trading range for the Nifty could be 12,400 to 13,000 levels.

On option front, maximum Put open interest was seen at 12,000 followed by 11,000 strike while maximum Call open interest was seen at 13,000 followed by 12,500 strike. Call writing was seen in 12,700 and 13,000 strike while Put writing was seen at 12,700 then 12,600 strike.

Bank Nifty opened positive at 28,713.15 and continued its upward movement to hit a day's high of 29,030.90. It managed to close the session with gains of 239 points at 28,845 in spite of consolidation in some banking stocks. It formed a small bodied candle on daily scale but has been making higher highs - higher lows from last eight trading sessions.

"Bank Nifty has to continue to hold above 28,200 to witness an upmove towards 29,250-29,500 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.