Tech view: Nifty50 forms Inverted Hammer, reflects bearish sentiment
By Amit Mudgill
NEW DELHI: Resistance at the day’s high point of 9,575 pulled down the Nifty50 on Wednesday, as the index managed to close slightly higher for the first time in seven sessions amid strong volatility as the June series futures & options contracts expired.
The index formed a candlestick pattern called ‘Inverted Hammer’ on the daily chart, suggesting scepticism among investors over market strength.
As can be seen on the charts, the real body remained small, reflecting a narrow difference between the opening and closing levels. The formation of a long upper wick and a small lower wick suggests the index wiped off the gains during the session, even though it did not fall much from the opening level. (See chart)
“The Nifty50 formed an inverted hammer on the daily chart, as it failed to hold the gains and corrected sharply towards the 9,500 mark. If it sustains below the recent swing low of 9,480, fresh selling could drag the index towards 9,450 and 9,420 levels,” said Chandan Taparia of Motilal Oswal Securities.
“On the upside, the index has a strong hurdle in the 9,560-9,580 zone. It doesn’t get inside the previous trading zone between 9,560 and 9,700 levels, even as weakness continues,” Taparia said.
The Nifty50 opened above the psychological mark of 9,500 and hit the day’s high of 9,575, before selling emerged. The index hit the negative terrain briefly before closing the day at 9,504, up 0.14 per cent.
Mazhar Mohammad, Chief Strategist for Technical Research & Trading Advisory, Chartviewindia.in, said the Nifty50’s fall from the day’s high, suggesting lack of conviction among market participants at higher levels.
“Historically, such a formation appears around bottoms, as traders usually develop scepticism about market rally after the correction. For the last three sessions, the Nifty50 appeared to have made an attempt to consolidate around the 9,470 level, which is close to its 50-DMA. Unless the 9,470 level is breached on a closing basis, traders can remain positively biased,” Mohammad said.
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Via:: Economic Times – Stocks