Hanging Man shows warning sign of a potential trend reversal

By Ashu Bagri

Where are we: Nifty futures chart has made ‘Hanging Man pattern’ in the weekly chart. The ‘Hanging Man pattern’ is a one candle reversal pattern which has got more significance if it appears after a strong uptrend. The pattern suggests that sellers are gaining control. Long lower shadow shows strength of sellers, though buyers regain the lost grounds and closed price near high of candle. It shows warning sign of a potential trend reversal.

What is in store: The Nifty futures may find support around 11,413 and 11,602 on the downside. The Nifty futures may find resistance around 11,740 and 11,947 on the upside. The Nifty futures has closed at middle level of the weekly charts showing indecision and bearishness for the next week. The volumes were more as compared to previous week showing strength in the down move. The Nifty futures has closed above 11,602. If it remains above 11602, then immediately on the up side it will find resistance at 11,740. A close below 11,602 can take the Nifty to lower level around 11,413.


What could investors do: Selling at higher levels is advisable. We expect an indecision and bearishness in the trading sessions next week. We expect the Nifty futures will find selling pressure around 11,740 and buying support around 11,602. Broader trading range for the week: 11,413–11,947. Immediate probable trading range for the week: 11,602–11,740. The stocks which we are bullish on next week and which can be bought are Infosys, Axis Bank, UltraTech Cememnt and Hero Motocorp.

The author is A.V.P-Technical Research, SBICAP Securities.