Nifty50 Forms a ‘Hanging Man’ Pattern
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, Chartviewindia.in 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.