Now and then, the market hints toward movement in some direction, and traders leverage these hints to create opportunities. A bullish hammer was formed yesterday on the Nifty 50 which has become the center of focus. Alongside, the S&P BSE Sensex increased by 454.11 points or 0.59% to settle at 77,073.44, and the broader Nifty closed at 23,344.75, an increase of 141.55 points or 0.61%. This generic increase in two indexes is viewed as a shift or impetus in the market. So here it is, a simple context of What This Is Telling You and how market participants can react to this!
First, the hammer pattern needs to be interpreted on the backdrop of the market context as a whole. As for Monday, the Nifty opened on a weak note but progressed to recover from intraday lows, which is why strong buying interest was evident. This recovery is also consistent with the formation of the bullish hammer.
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Just like the previous direction of a hammer, a bullish hammer has confirmation at the beginning of the next session. Here, traders should hope for upward steep movements or a green candlestick today to assess the pattern. The pattern might not work if today’s opening market is weak or the closing market is low.
A significant low of the Monday’s session forms a crucial support line. The index needs to remain above this level because it strengthens the bullish sentiment. The traders should pay attention to resistance areas like sensory highs as they tend to be upward targets.
Find the stocks or sectors that helped in the recovery of Monday’s selling. Banking, IT or FMCG stocks can continue to be bullish and thus are profitable in trading. Spread your trades in many sectors to avoid risk.
It is always a worry when bullish hammers appear. As promising as it seems, you can never trust the market since it unpredictably makes a dire move. Always set stop-loss levels to protect your capital.
With the use of technical indicators Relative Strength Index (RSI), Moving Averages, or Volume Analysis, you can strengthen your trading decisions. Combining signals can provide better insight into market trends.
Broadly, the market sentiment looks positive from earning releases perspective, as traders may look to take calculated positions. Staying aware of both the leading while also the lagging sectors greatly aids in Risk Management. As most traders tend to forget, money management comes before anything else in trading. While there are many avenues out there, investing in yourself and your knowledge is the most important one.
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If you want to know more about Risk Management & Intraday Trading Strategies you can refer to our previous blog on
Importance Of Risk Management In Trading and 10 Best Intraday Trading Strategies.
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