Tech view: Nifty50 forms ‘Hanging Man’ pattern; trend reversal likely anytime soon

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NEW DELHI: The Nifty50 on Monday hit a fresh record high and closed above the 9,200 level for the first time ever. But with the lower wick nearly twice as long as the body and no upper wick, the index has formed a pattern similar to the ‘Hanging Man’ formation on the daily chart.

Monday was the fifth consecutive session when the Nifty50 made a green real body and the risk-reward ratio still favoured the bulls.

Some analysts are cautiously optimistic on the index, as they expect the trend to reverse anytime soon. The 14-day RSI now suggests the Nifty50 has entered the overbought territory.

“Overbought is a condition, which can spread across multiple days, and you do not know which of those days will actually bell the cat. We are surely getting into those zones and there is no doubt about it,” said CK Narayan, Founder of Chart Advise.

“This particular pot needs to boil a little more before it reaches the overbought level, which will produce a reversal,” Narayan told ET Now.

The index opened on a positive note and soon hit the day’s low of 9,192. It then recovered ground and soon hit a record high of 9,245, before closing the day at 9,237, up 64.10 points, or 0.70 per cent.

“The negative divergence witnessed on some of the momentum indicators of the main indices remains a concern. This rally may get a further fillip, if RBI succeeds in meeting market expectations. In such a scenario, we can expect the Nifty50 to target the 9,350 kind of level,” said Mazhar Mohammad, Chief Strategist for Technical Research & Trading Advisory at Chartviewindia.in.

“In the absence of any ‘sell’ signal, since technical evidence is still favouring the bulls in the near term, we advise traders to remain cautiously optimistic with a stop loss below the 9,118 level on a closing basis,” Mazhar said.

The index has been making higher highs and higher lows since the past five sessions and it has been trading in the uncharted territory, said Chandan Taparia, Derivative & Technical Analyst at Motilal Oswal Securities.

“Now, if it holds above 9,191, it can extend the upward move towards 9,280 and 9,350 levels, while on the downside, multiple supports are seen in the 9,150-9,133 zone,” Taparia said.