Tech view: Nifty50 forms ‘Bullish Harami’ pattern; traders stay cautious

Let us first understand the meaning of "BULLISH HARAMI" pattern

The bullish harami is a downtrend or bearish candlestick (red) engulfing a small bullish candlestick (green), giving a sign of a reversal of the downward trend.

BY RAHUL OBEROI , ETMARKETS.COM | UPDATED: MAY 08, 2017, 04.35 PM IST

After falling over 50 points in the previous trading session, NSE’s Nifty50 index reclaimed the psychological level of 9,300 on Monday and closed 28.75 points higher at 9,314. In the process, the index formed a ‘Bullish Harami’ pattern on the daily chart. 

The Nifty50 opened at 9,311 and touched an intraday high and low of 9,338 and 9,297, respectively. 

Monday’s session was more of a continuation of the consolidation pattern with a minor uptick. An inside bar occurred, as the Nifty50 formed a lower high and higher low. Market experts see no major surge in the domestic equity indices in the coming sessions. 

Milan Vaishnav, CMT, Consultant Technical Analyst said, “On candles, a ‘Bullish Harami’ has occurred on the daily charts. When such a pattern occurs during an uptrend, it is considered a bearish signal. In the present scenario, it clearly implies that the market will continue the corrective tendency for some more time and no runaway rise is likely.” 

Chandan Tapari, Derivatives and Technical Analyst, Motilal Oswal Financial Services, said: “The Nifty50 formed an inside bar as well as a ‘Bullish Harami’ pattern on the daily chart, which indicate an indecisiveness and the bears are not getting a grip on the market.” 

A Bullish Harami is a two-candlestick chart pattern, in which a large candlestick is followed by a small candlestick. The body of the smaller candlestick is located within the vertical range of the larger body. 

On the options front, maximum Put open interest (OI) stood at strike price 9,300 followed by 9,200 while maximum Call OI was at 9,400 followed by 9,500. Select cement, pharma and banking counters have seen positive price actions while metals and oil & gas stocks were under selling pressure on Monday. 

From the Nifty50 basket, the day clearly belonged to a couple of cement giants, Ambuja Cements(up 4.89 per cent) and AC (up 2.67 per cent), as the stocks soared on the back of their merger news.Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, said for short-term trading, “traders need to remain cautious and watch the 9,269 level as a breach of this level can confirm the seven-day-old range breakdown and create short-term pressure on the market with immediate downside targets of 100 odd points, which may be enough to set a short-term panic and drag the indices down towards the 9,000 mark.”