Nifty Trade Setup for September 11: Hammer Pattern Emerges After Three-Day Fall

After witnessing losses in the previous three trading sessions, the Nifty 50 index managed to end Thursday’s session in positive territory. The index opened with a positive bias; however, volatility soon set in, pushing it towards lower levels during the session. The recovery came during the closing auction session (CAS), which helped the benchmark index turn positive and close 46.30 points higher at 23,477.80.

Market Breadth Remains Under Pressure

Despite the recovery in the headline index, the market breadth remained titled in favour of declining stocks. Out of the 50 constituents of the Nifty 50 index, 26 stocks closed in the red, while 24 stocks ended higher. The overall market breadth also remained tilted towards declines.

Sectoral Performance: Nifty Metal Emerged as Biggest Laggard

Most sectoral indices ended the session in negative territory. However, some key sectors managed to buck the trend, with Nifty Financial Services, Nifty Media, Nifty PSU Bank and Nifty Bank closing in the green.

On the other hand, Nifty Metal emerged as the biggest laggard among sectoral indices, weighing on the overall market performance.

Hammer Pattern Offers Hope, But Confirmation Is Needed

The day’s price action resulted in the formation of a green-bodied candle with a long lower shadow, indicating buying interest at lower levels. However, the index continues to maintain its sequence of lower highs and lower lows on the daily time frame, keeping the short-term structure under pressure.

Technically, there has been no major change in the overall trend. However, the formation of a hammer-like candle after a sharp decline and the index entering oversold territory provides some hope of a short-term recovery. A hammer pattern after a sustained fall is generally considered a potential bullish reversal signal, but confirmation remains important.

For the bullish setup to gain strength, the Nifty needs to sustain above the 23,495 level. The immediate resistance zone lies near the downside gap created on September 9, placed between 23,572 and 23,623. A decisive close above this gap zone could indicate improving sentiment and may trigger further short covering. In such a scenario, the next upside hurdle for the index would be the 8-day EMA, currently placed near 23,720.

Trend Still Remains Cautious

Despite Thursday’s recovery, the overall technical structure remains weak, as the index continues to trade below its key short-term, medium-term and long-term moving averages.

However, the combination of a hammer formation after a decline and the 14-period RSI remaining below 30, indicating oversold conditions, keeps the possibility of a short-term relief rally alive. Investors will closely watch whether the index can sustain above immediate resistance levels to confirm a meaningful recovery.