Tech View: Nifty forms Hanging Man; analysts say a fall can’t be ruled out

NEW DELHI: Nifty50 on Friday climbed for the fifth straight session. In the process, it topped the 16,700 mark, but formed a ‘Hanging Man’ candle on both daily and weekly charts. Analysts said the prevailing charts do not instill confidence, even though this was the fourth week in a row when the index made a higher high-low formation. A minor dip cannot be ruled out, analysts said.

Gaurav Ratnaparkhi of Sharekhan said Nifty50 could not stretch beyond the hourly upper Bollinger Band and a trendline drawn from the recent swing highs.

“Also, the hourly momentum indicator has developed a negative divergence today, while the daily momentum indicator is already having a negative divergence. The momentum is not supporting the price action on the upside. Thus, the overall structure shows the index is likely to see a minor degree dip over the next few sessions, before extending higher,” Ratnaparkhi said.

For the day, the index closed at 16,705, up 68.30 points or 0.41 per cent.

Mazhar Mohammad of said formations such as Hanging Man are usually visible around short-term turning points. He cited the failure of momentum oscillators on the daily charts to keep their pace with the rally on the price chart while suggesting a possible weakness ahead.

“If Nifty50 remains above 16,565 level, the index can head towards 16,950-17,000 levels. In case the 16,565 level is breached on a closing basis, a retest of recent low of 16,376 can’t be ruled out. Long side traders are advised to maintain a stop loss below 16,565 level, while intraday traders with high risk appetite can consider longs if Nifty50 sustains above 16,722 for a target of 16,800-850,” he said.

Chandan Taparia of Motilal Oswal Securities sees support for the index at 16,500 and 16,380 levels. “It has to hold above 16,700 to extend the move towards new-life time highs of 16,800 and 17,000, he said.

Shrikant Chouhan of Kotak Securities said that the 10-day SMA or the 16,550 level would be sacrosanct for a breakout. If the index stays above it, the uptrend may continue up to the 16,825-16,950 levels. “A fall below this level may trigger temporary weakness till 16,375-16,300 levels,” he said.

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