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14 Jan 2019

STOCK MARKET--Technical View: Nifty forms 'Hammer' pattern, ends below 10,800; focus on stock specific opportunities

Chandan Taparia of Motilal Oswal said now the index has to continue to hold above 10,750-10,777 zones to witness an upmove towards 10,880 then crucial hurdle at 10,925-10,985 zones.
Sunil Shankar Matkar
It was another rangebound session for the market on Friday as traders await more December quarter earnings. The Nifty50 closed lower for the second consecutive session despite positive Asian cues, dragged by select banks and auto stocks.
The index closed below 10,800 levels and formed 'Hammer' kind of pattern on the daily charts (which also resembles 'Hanging Man' pattern) and showed 'Doji' formation on the weekly scale. For the week, the Nifty gained 0.6 percent.
After the rangebound trade for last few sessions, the index is expected to show direction on either side in coming week, experts said, adding earnings could be key reason for the move.
The Nifty50 after opening marginally higher hit a day's high of 10,850.15, but in morning itself, it drifted lower to touch an intraday low of 10,739.40 followed by small recovery from day's low in late trade. The index was down 26.60 points to close at 10,795.
"Nifty50 registered a Hammer formation before signing off the last session of the week as it smartly recovered from day's low of 10,739 levels where as weekly chart registered a 'Doji' with positive close after moving in a narrow range of 137 points throughout the week," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said this kind of narrow ranges pointing towards a possible breakout in either of the directions in the next week, but long lower shadows, registered on Nifty in last couple of trading sessions is hinting at a buying interest on dips around 10,730 kind of levels.
As long as the said level is defended by bulls the possibility of upward breakout can't be ruled out though such a breakout will be confirmed on a strong close above 10,870 levels thereby paving the way for a sustainable upmove, he feels.
Contrary to this a close below 10,700 shall accelerate selling pressure, he said. For time being, he advised traders to adopt a neutral stance on index and focus on stock specific opportunities in both directions.
A Hammer which is a bullish reversal pattern is formed after a decline while a Hanging Man is a bearish reversal pattern. A Hammer consists of no upper shadow, a small body, and long lower shadow. The long lower shadow of the Hammer signifies that it tested its support where demand was located and then bounced back.
A 'Doji' is formed when the index opens and then closes approximately around the same level but remain volatile throughout the day which is indicated by its long shadow on either side. It appears like a cross or a plus sign.
India VIX remained flattish and marginally moved up by 0.08 percent at 15.35 levels. VIX has to continue to hold below 16 zones to again get a bounce back move in the market.
On the option front, maximum Put open interest (OI) was seen at 10,000 followed by 10,500 strike while maximum Call OI was at 11,000 followed by 11,200 strike.
Call writing was seen at 11,000 followed by 10,900 strike while Put unwinding was seen at most of the immediate strikes. Option band signifies an immediate trading range in between 10,700 to 10,900 zones.
"Nifty index a small 'Doji' candle on weekly scale which indicates indecisiveness as follow up is missing on both the side in the market. It has been flirting to its 50 DEMA and continued its alternative positive and negative weekly close for ninth week," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited said.
Now the index has to continue to hold above 10,750-10,777 zones to witness an upmove towards 10,880 then crucial hurdle at 10,925-10,985 zones while on the downside, if it fails to hold 10,720 zones then only it can see a dips towards 10,650-10,600 zones, he added.
Bank Nifty negated its higher highs formation on daily scale but managed to hold above 27,350-27,400 zones.
The index closed 74.65 points lower at 27,453.90 and formed a bearish candle on daily scale but formed higher highs-higher lows on weekly scale.
"Now it has to continue to hold above 27,350-27,400 zones to extend its gains towards 27,750 zones while on the downside support exists at 27,150-27,000 zones," Chandan Taparia said.
Nifty future closed negative with losses of 0.41 percent at 10,813 levels. Built up of long positions were seen in ICICI Prduential, Torrent Pharma, Mindtree, Muthoot Finance, Repco Home, DCB Bank and KPIT Technologies while shorts were seen in Arvind, Just Dial, TCS, IndusInd Bank, Tata Motors and IndiGo.

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