Tech view: Nifty forms Hammer candle, takes support at 50-DMA
Analysts termed Wednesday’s gains as a counter-trend rally. They believed the gain may extend when trading resumes on Friday. Markets will be shut on Thursday on account of Ganesh Chaturthi.
The formation of a Hammer candle after a reasonable weakness could indicate short-term upside reversal for the market, said Nagaraj Shetti of HDFC Securities. Thus, the extreme short-term outlook looks slightly positive.
“A sustained trade above 11,385 can extend this short covering-induced rally to 11,430 and 11,467 levels. A failure to take out the resistance level can make Nifty resume the corrective wave towards the 11,250-11,190 range,” said Aditya Agarwala, Technical Analyst at YES Securities.
The index rose 82.40 points, or 0.73 per cent, to close at 11,369.90. The daily RSI has turned upwards after forming a positive divergence at the oversold zone on the shorter timeframe chart.
Gaurav Ratnaparkhi, Senior Technical Analyst at Sharekhan, said the formation of a Hammer candle is a bullish indication and if the index overlaps with the swing low of 11,394, there is a case for a deeper pullback.
“Nevertheless, the trend continues to be downward. One needs to keep an eye on the pullback after which fresh short positions can be created. Wednesday’s low of 11,250 may remain a key support,” he said.
Mazhar Mohammad of Chartviewindia.in said it looks like a counter-trend rally on the lower timeframe charts based on wave counts, which if materialise, should have the best-case scenario target of 11,658 on the upside. He advised traders to position themselves to play this counter-trend rally with a stop loss below the 11,250 level.