Nifty formed a small bodied bearish candle on the daily chart and a bearish hammer pattern on the weekly chart.
Nifty opened higher at 15800 and gradually extended gains to hit the day's high of 15862 in the afternoon. Index, however, undid all the gains in late trade to hit an intraday low of 15744and closed 15 points lower at 15763.
During the week, Index fell 0.6 percent and made a hammer pattern on the weekly Chart. Listless trade is expected to continue in the coming sessions.
A shooting star pattern is formed when the index comes under selling pressure as traders start booking profits at higher levels. The pattern is usually formed in an uptrend and is treated as a reversal pattern but requires confirmation.
The hammer is a bullish reversal pattern formed after a decline. It consists of no upper shadow, a small body, and long lower shadow. The long lower shadow signifies the stock bounced back after testing its support, where demand is located.
The hammer formation on weekly chart may not count for much. Moreover, monthly charts also registered two back-to-back indecisive candle formations with an extremely narrow trading range of around 450 points, hinting at a pause in momentum.
If we closely observe the price action of the last five week, it appears that the Nifty is stuck in an extremely narrow range out of which four are negative candles.
It seems the index may be positioning itself for a make or break kind of a level, forcing traders to focus on lower time frame chart, where the trading range is prevalent between 15962 and 15600.
For any sustainable action, the index needs to break out of this range and till then traders have no option but to remain neutral.
Sector Wise :- Pharma index added 3.6 percent, while auto index rose nearly 1 percent. However, some selling was seen in the metal and financial names.