Hello,
Markets stopped at the crucial 5350 level and bounced back from there to create a hammer candlestick pattern. The Hammer is a bullish reversal pattern that forms after a decline. In addition to a potential trend reversal, hammers can mark bottoms or support levels. Since it has come after a decline, hammers signal a bullish revival. The low of the long lower shadow implies that sellers drove prices lower during the session. However, the strong finish indicates that buyers regained their footing to end the session on a strong note. A confirmation of hammers require further bullish confirmation. The low of the hammer shows that plenty of sellers remain. Further buying pressure, and preferably on expanding volume, is needed before acting. Such confirmation could come from a gap up or long white candlestick. Hammers are similar to selling climaxes, and heavy volume can serve to reinforce the validity of the reversal. Yesterday's volume while not very huge was more than the volume of Monday and hence significant.
Put-Call Ratio on Nifty came in at 1.47 and Implied Volatility at 17. Maximum Put open Interest is at 5400 further confirming that 5350 may sustain for the short term. Among Nifty Call Options, 5500 - 5600 carries max OI thus signifying the resistance at the level.
Regards
Prashanth
Mythri Stocks & Shares Pvt Ltd.,
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