Technical View: Nifty forms Hammer pattern, may continue to trade in a range with positive bias

Mazhar Mohammad of Chartviewindia.in advises traders to wait for one or two trading sessions for better clarity of trends.

Nifty50 witnessed volatility right from the start of the session on December 22 amid weak Asian cues due to new coronavirus strain discovery in the UK, but gained strength in last couple of hours of trade to close a percent higher.

The recovery in European peers and Congress' green signal to COVID relief bill in the US lifted sentiment. IT and Pharma stocks led the rally.

Nifty formed small bullish candle which resembles Hammer kind of pattern on the daily charts.

The Hammer is a bullish reversal pattern formed after a decline. A Hammer consists of no upper shadow, a small body, and long lower shadow. The long lower shadow signifies that the stock tested its support, where demand was located and then bounced back.

As market may remain volatile, Mazhar Mohammad of Chartviewindia.in advises traders to wait for one or two trading sessions for better clarity of trend.

The Nifty50 opened higher at 13,373.65 and turned volatile to hit an intraday low of 13,192.90, but recovered in the last couple of hours of trade to hit a day's high of 13,492.05 on December 22. The index rose 137.90 points, or 1.03 percent, to close at 13,466.30.

"It appears to be the day of consolidation on the bourses as Nifty50 registered Hammer kind of formation post the big correction witnessed in Monday's session. As bulls successfully defended the low of preceding session present around 13,131 levels, Nifty may continue rangebound move with positive bias and in that scenario best case target for the near term can be 13,643 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

However, if the index fails to sustain above 13,131 levels, then it can once again strengthen the bears for a target of 13,047 levels, he said.

The cooling down volatility also supported the market. India VIX fell by 5.20 percent from 23.19 to 21.98 levels.

Option data indicated that the Nifty could remain in a broader trading range of 13,000 to 13,750 zones in coming sessions.

On option front, maximum Put open interest was at 13,000 followed by 13,500 strike while maximum Call open interest was at 14,000 followed by 13,500 strike. Marginal Call writing was seen at 14,000 then 13,700 strike while Put writing was seen at 13,000 then 13,400 strike.

Bank Nifty opened positive at 29,607.50 then gradually drifted to hit a day's low of 28,976.75 amid volatility. It managed to hold key support zones and gave a decent recovery of more than 700 points from lower levels by reclaiming it opening zones to hit an intraday high of 29,711.15.

The index gained 169.50 points at 29,626 and formed a Dragon Fly Doji on daily scale.

"The Dragon Fly Doji formation after the weakness of last two trading sessions indicates potential upmove if follow up happens. Bank Nifty has to continue to hold above 29,500 levels to witness an upmove towards 30,000 and 30,200 while on the downside support is seen at 29,200 and 29,000," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

"Positive setup was seen in Mindtree, Indraprastha Gas, HCL Technologies, Tech Mahindra, Mahanagar Gas, Infosys, Wipro, ICICI Prudential, Nestle India, Titan, Bharti Airtel, Berger Paints and Pidilite Industries while weakness was seen in PVR, Bharat Forge and IndusInd Bank," he added.