Bulls Pause as Nifty50 Forms ‘Hanging Man’ Pattern
A Hanging Man pattern on the candlestick is a bearish pattern and is usually formed at the end of an uptrend. Such indecisive patterns on the technical charts for two consecutive days indicate that the bulls might be losing momentum.
In a Hanging Man pattern, the market witnesses significant selloff towards the opening of a trading session but the bulls then manage to push the prices higher and the index closes near the opening price.
The Nifty50 opened at 7,950.05 and hit an intraday low of 7,877.55, thus forming a long down shadow. But there was no upper shadow on the charts as the intraday high was at ₹ 7,950.40. The index recovered from its intraday low to close at 7,914.75.
“This kind of price pattern clearly Intra-day
suggests that the bulls are ready for a pauseasnofurthertriggersarevisible to carry on the momentum in the upwarddirection.Tradersshouldbecautious and wait for a short-term downswing, which will get confirmed once the Nifty50 slips below the 7,868 level,” Mazhar Mohammad, chief strategist - technical research and trading advisory, Chartviewindia.in said.
Traders should not conclude that the bulls have lost control and go short on the index at current level. They should analyse chart patterns for the rest of the week. If the index slips below its 200-DMA, that should be taken as a warning sign that the bulls might be losing grip.
“The Nifty50 has formed a reversal candlestick pattern for the second day inarow.Theindexistradingbelowthe important resistance and psychological level of 8,000,” Vivek Gupta, CMT - director research, CapitalVia Global Research, said. “If Nifty50 confirms Wednesday’s reversal candlestick by givingagap-downopeningandclosing below today’s closing level, we can expect a short-term correction,” he said.