Investors who are long on Nifty can consider booking partial profits while for the rest of the position a strict stop loss below 10,426 could be placed, suggest experts.
The bulls remained in control of D-Street despite weak global cues to take the index to a fresh record high of 10,545.45 on Tuesday. The index formed a bullish candle for the second consecutive day in a row which closely resembles a ‘Hanging Man’ kind of pattern on daily charts.
The index continues to make high highs and higher lows which suggest that the bullish momentum remains intact, but considering the fact we are trading near record highs some consolidation cannot be ruled out.
Investors who are long on Nifty can consider booking partial profits while for the rest of the position a strict stop loss below 10,426 could be placed, suggest experts.
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.
The market witnesses a significant selloff in the beginning just like we saw in Tuesday’s trading session but still manages to recoup some of the losses and closes near the opening level.
The Nifty50 which opened at 10,512.30 slipped to an intraday low of 10,477.95 which made a long lower shadow, but then bulls took control and pushed the index to a record high of 10,545.45 which made a small upper shadow.
“Albeit Nifty50 registered a new lifetime high it witnessed a ‘Hanging Man’ kind of formation after moving in a narrow range of around 60 points. However, as momentum is quite strong and favouring bulls it looks prudent to ride the rally with a stop below 10426 levels on closing basis,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“Traders are advised to take a cautious stance as we head towards critical resistance points of 10600 – 10,650 levels and they should consider part profit booking in next trading session as we head higher towards 10,600 levels and remain focused on extremely stock specific opportunities,” he said.
India VIX moved up by 3.99 percent at 12.05. Volatility moved higher after declining in the last six trading sessions. Overall lower volatility is supporting the Bullish bias of the market.
On the options front, maximum Put open interest was seen at 10,000 followed by 10,400 strikes while maximum Call OI was seen at 10,500 followed by 10,600 strikes. Significant Put writing was seen at 10500 strikes while fresh Call writing was seen at 10550 to 10700 strikes.
“Shift in Put writing, as well as Call writing to higher strike, suggests shifting of the support. Option band signifies a broader trading band between 10400 to 10600 levels for next coming sessions,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“Nifty formed a Bullish candle on the Daily chart and given the highest daily close with the intraday gains of around 40 points,” he said.
Taparia further added that Nifty has to continue to hold above 10500 zones to extend its move towards 10600-10650 while on the downside supports are seen at 10450 then 10400 levels.
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