Nifty forms Hanging Man candle near all-time high
Normally, this pattern is an indication of exhaustion of the trend; The current price action with higher volume shows very little chance for a pullback in near term
image for illustrative purpose
The benchmark indices closed higher for the third consecutive day as NSE Nifty closed at 20,133.15 with 36.55 points or 0.18 per cent gain. The Nifty Pharma and Realty indices were the top gainers with 1.56 per cent and 1.44 per cent. Bank Nifty, IT, and Energy indices closed with moderate losses. All other indices gained with decent gains. The India VIX is down by just 0.14 per cent to 12.69. The market breadth is positive as 1,327 advances and 1,165 declines. About 165 stocks hit a new 52-week high, and 87 stocks traded in the upper circuit.
IndusInd Bank, Tata Technologies, and HDFC Bank were the top trading counters, in terms of value.
The Nifty was able to recover the initial losses and closed positively by the end of the day. The last hour’s 75-point recovery made a difference today. The volumes were much, much higher and highest after 28th September. For the last three days, the volumes were recording above average. The index filled the 20th September gap completely and closed just 58.35 points away from the all-time high close.
During November, the Nifty gained 1,053.55 points or 5.52 per cent. At the same time, it gained 1,320.85 points of 7.01 per cent since the 26th October low. Comparatively, this is most impulsive move than the previous swings.
Today’s important price action is that it has overcome the initial supply into the market. The index has formed a Hanging Man candle, near an all-time high. Normally, this pattern is an indication of exhaustion of the trend. The current price action with higher volume shows there is very little chance for a pullback in the immediate term.
As stated on Wednesday, the Nifty supports have shifted to the 19,902-20,130 zone. On the hourly chart, the RSI has developed a negative divergence again. When everything is euphorically bullish, these small factors can influence future price action. The prior day’s low is an immediate stop loss for the long positions. But it will be a heroic adventure if we take a short position in the current market condition. It is better to stay with utmost caution on the positions and be vigilant.
(The author is Chief Mentor, Indus School of Technical Analysis Financial Journalist, Technical Analyst, Trainer, Family Fund Manager)
