The Nifty50 managed to trim losses in the second half and closed off day's low amid weak Asian cues on Friday, but the broader markets caught in complete bear trap as the Nifty Midcap and Smallcap indices were down a percent each.
The index registered a bearish candle, which resembles a Hammer kind of formation on the daily charts and 'Bearish Belt Hold' pattern on the weekly scale.
Hammer formations on daily charts should have bullish connotations for the near term, but traders need to be cautious as weakness on weekly charts is getting more pronounced, experts said.
A 'Bearish Belt Hold' pattern is formed when the opening price becomes the highest point of the trading day (intraday high) and the index declines throughout the trading day making up for the large body. The candle will either have a small or no upper shadow and a small lower shadow.
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.
The Nifty50 after opening moderately higher managed to hit an intraday high of 10,785.75 in early trade itself, but immediately bears took the control of Dalal Street and the index fell up to 10,620.40 in afternoon, followed by a bit of recovery in second half of session. The index cut down losses and closed down 21.60 points at 10,724.40.
"It was heartening to see Nifty50 staging a pull back move from the critical supports, placed around 10,600, as it recouped all the intraday losses which resulted in a Hammer kind of formation with a long lower shadow but weekly charts depicted a Bearish Belt Hold formation as Nifty continued to remain under pressure throughout the week from the highs of 10,930," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said usually Hammer formations on daily charts should have bullish connotations for the near term provided in the immediate session market witness a follow through buying.
In such a scenario sustaining above 10,700 levels on closing basis Nifty should ideally target 10,900 levels, he added.
Source:https://www.moneycontrol.com/news/business/markets/technical-view-nifty-forms-bearish-belt-hold-pattern-on-weekly-charts-tread-with-caution-3544931.htmlIf you need more information about the Stock Market:
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