Technical View: Nifty forms Hammer pattern on daily scale, 12,730 crucial for further upside

Mazhar Mohammad of Chartviewindia.in expects the Nifty to consolidate in the 12,963 –12,730 range.

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The Nifty50 came back strongly on November 20 after declining 1.3 percent the previous day to recoup some of the losses, as banking & financials, FMCG and IT stocks led the rally.

The recovery from the day’s low in the last hours of the trade helped the index form a small-bodied bullish candle that resembled a hammer pattern on the daily charts. The index, however, formed a bearish candle on the weekly scale as the closing was lower than the opening levels.

The hammer is a bullish reversal pattern formed after a decline. A hammer consists of no upper shadow, a small body, and long lower shadow. The long lower shadow signifies the stock or the index testing its support, where demand was located and then bounced back.

Experts feel 12,730, which was the day’s low on November 20, could be a crucial level for consistency in upside.

Considering the last price behaviour in the last two sessions, the Nifty could consolidate in a range of 12,963–12,730, Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory at Chartviewindia.in said. He advised traders to remain focussed on stock-specific opportunities by avoiding index movement.

The Nifty50 opened higher at 12,813.40 but witnessed some selling pressure in late morning deals to hit the day’s low of 12,730.25. The index recouped losses in the afternoon to hit the day’s high of 12,892.45, before signing off the session at 12,859, up 87.30 points.

“The bulls made a roaring come back from the intraday low of 12,730 levels which resulted in a Hammer kind of formation on daily charts but weekly charts depicted Spinning Top kind of indecisive formation. Moreover, despite Friday’s strong upmove, trading range for the week remained 233 points, which is a cause for concern, hinting at a pause in the ongoing momentum,” Mohammad said.

Traders can retain a positive stance as long as the Nifty sustains above 12,730 and the index’s strength will be confirmed on a close above 13,000 , he said, adding in such a scenario, the upswing may initially get extended towards 13,200. If the index breaches 12,730, then it can slip to 12,600 levels.

India VIX was marginally up by 0.24 percent from 19.57 to 19.61 levels.

Options data indicated that the Nifty could see a wider trading range of 12,500 to 13,000 levels in the coming days.

On the options front, maximum Put open interest was seen at 12,000 followed by 12,500 strike while maximum Call open interest was at 13,000 followed by 13,500 strike. Marginal Call writing was seen in 13,200 and 12,800 strike while Put writing was seen at 12,800 then 12,500 strike.

The Bank Nifty opened positive at 28,935.75 but saw selling pressure in the first half of the day which was followed by a smart recovery. The index ended in the green, gaining 333 points, or 1.15 percent, at 29,236.

The index formed a bullish candle on daily and weekly scales. It has been consolidating between 28,500 and 29,800 for the last four sessions.

“The Bank Nifty requires a follow-up action to commence the next leg of the rally. It needs to hold above 29,000 to witness an upmove towards 29,500 then 29,800 while on the downside, support is seen at 28,750 then 28,500 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Positive setup was seen in Bajaj Finserv, Titan, Jubilant Foodworks, GAIL, UBL, Kotak Mahindra Bank, Bharti Airtel, MRF, Nestle, Grasim, Motherson Sumi, HDFC Bank and ITC while weakness was seen in PVR, Reliance Industries, Sun Pharma and BPCL, he added.