Nifty Analysis: Tech View: Nifty forms Hanging Man, looks poised to slow down

NEW DELHI: Nifty formed a ‘Hanging Man’ kind of pattern on daily charts on Wednesday, which is a bearish reversal pattern, a hint that the ongoing rally may be nearing its end, said analysts.

Nifty continued its climb in the third straight day, breaching all records and closed at 14,789, registering a gain of 0.97 per cent or 142.10 points. In the last three days, it has rallied over 1,150 points.

“Despite this kind of sharp rise witnessed from the lows of 13,596 to a high of 14,868, the momentum oscillators are presenting a completely different picture, as the daily MACD still remains in ‘sell’ mode, the RSI continues with lower tops and some other leading momentum indicators have reached the overbought zone,” said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory,

He said from its current level, the market may either correct or consolidate over the next few sessions. Any weakness will be confirmed if the index closes below 14,574, and upside may remain capped around 15,000.

“For the time being, traders are advised not to create fresh long side exposure and it looks like they will be better off remaining neutral,” Mohammad said.

Check out the candlestick formations in the latest trading sessions

The intraday move on Wednesday was volatile with the candle making longish shadows on both sides. Understandably, India VIX, the barometer of volatility in the market, rose by nearly 2 per cent.
Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas, believes this warrants caution. “The index is on course to test the key psychological mark of 15,000. However, the hourly chart has developed a negative divergence, which means the higher high pn the index is not accompanied by a higher high in the hourly momentum indicator. Hence, any further rise towards 15,000 level is unlikely to be a one-sided move and can have minor corrections in between,” he said.

Analysts, however, are confident that Nifty is going to move higher in the medium term and is likely to go towards 16,000 level. This requires a ‘buy on dip’ strategy.

“Structurally, Nifty50 is poised for further rise in the medium term while short-term consolidation is expected. We see a base for the index at 13,450 while the 16,000 level is achievable on the higher side. In the short term, volatility is expected to be high and any correction should be used as a buying opportunity,” said Sahaj Agrawal, Head of Research- Derivatives at Kotak Securities.