Nifty50 Forms a ‘Hang­ing Man’ Pat­tern

The Economic Times - - Money -

A ‘Hang­ing Man’ pat­tern sig­ni­fies that the bulls might be los­ing mo­men­tum. It should be taken as a warn­ing sign that the mo­men­tum may be weak­en­ing. The pat­tern should be stud­ied along with the can­dle­stick pat­terns made on the fol­low­ing trad­ing day.

The Nifty50 opened at 7,908.15 and hit an in­tra­day low of 7,842.75, thus mak­ing a long downward shadow. It re­cov­ered from the in­tra­day low to hit an in­tra­day high of 7,920.60 be­fore clos­ing at 7,914.70, up 64 points from its pre­vi­ous close of 7,850.45. “Al­beit the mo­men­tum was strong on Nifty50, it chalked out an in­de­ci­sive ‘Hang­ing Man’ pat­tern on the Ja­panese can­dle­stick charts, as it re­cov­ered around 1% from day’s low of 7,842 be­fore sign­ing off the day slight-

ly higher from its open­ing price,” Mazhar Mo­ham­mad, chief strate­gist - tech­ni­cal re­search and trad­ing ad­vi­sory, Chartviewin­ said.

“Usu­ally, such pat­terns sug­gest ex­haus­tion of mo­men­tum and it is vis­i­ble around the short-term tops. A con­fir­ma­tion of the weak­ness will come when Nifty50 slips be­low the 7,842 level. Added to this, the mo­men­tum os­cil­la­tors on the lower time frame charts are at the ex­tremely over­bought level,” he pointed out.

As Nifty50 has seen a strong break­out above its crit­i­cal re­sis­tance lev­els and is now firmly trad­ing above its 200-day mov­ing av­er­age placed around the 7,767 mark, the mar­ket may see a pause, but may not cor­rect sharply, in the next cou­ple of ses­sions, ex­perts said.

‘Hang­ing Man’ is a bear­ish re­ver­sal pat­tern. How­ever, tech­ni­cal ex­perts say traders should not jump to a con­clu­sion that the mo­men­tum is weak­en­ing and the in­dex is likely to fall from this level. The pat­tern still re­quires con­fir­ma­tion.

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