Technical View: Nifty forms 'Hanging Man' pattern, rangebound trade seen till 10,825

Mazhar Mohammad of Chartviewindia.in advised traders to avoid long positions for the time being unless it registers a decisive breakout backed by favourable advance decline ratio suggesting broad based participation.

The Nifty50 recovered from day's low but still ended in the red and snapped five-day winning streak on Tuesday, dragged by weak global cues.

The index after rising more than 200 points in previous five consecutive sessions declined and formed 'Hanging Man' kind of pattern on the daily scale.

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 Nifty50 after opening marginally lower at 10,949.80, which was also a day's high, extended losses to hit an intraday low of 10,864.15 in afternoon. The index managed to trim losses in second half of the session to close 39.10 points lower at 10,922.80.

The Nifty is expected to remain rangebound till it holds the support of 10,825 levels, experts said, adding after this rangebound trade, there could be a possibility of index reclaiming 11,000 levels.

"Nifty50 registered a Hanging Man kind of formation suggesting exhaustion of the ongoing upmove from the lows of 10,700 levels as bulls appear to have faltered once again around its critical resistance point of 10,985 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

He said it was interesting to observe that market breadth was not cooperating with recent upmove from the lows of 10,777 kind of levels pointing that broader markets continue to reel under pressure. "This is hinting that market can be distributing around 10,950 levels before breaking down further."

Hence, he advised traders to avoid long positions for the time being unless it registers a decisive breakout backed by favourable advance decline ratio suggesting broad based participation.

Meanwhile some support can be expected on dips around 10,825 levels and as long as this support is held market may remain rangebound between 10,985–10,825 kind of levels before witnessing a directional move, Mazhar said.

India Volatility index fell by 0.95 percent to 17.97 levels. Nifty Bank closed at 27,482.25, down 51.35 points from previous close.

The broader markets also ended the session lower as the Nifty Midcap index was down 0.11 percent and Smallcap index dropped 0.22 percent.

Source : www.moneycontrol.com

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