These 21 stocks have formed a ‘hammer’ with a bullish reversal signal

The Indian stock market has been trying to slowly claw back after the sharp slide over the last two months but it is still about 15% below its recent peak.

Even as the interest rate hikes by the US Fed and the RBI are playing out in the mind of investors, the slide in the crude oil price despite the continuing Russia-Ukraine war has given some comfort to local companies.

Investors looking at charts and price and volume patterns have various parameters to decide whether a stock is ripe for the pick or is showing signals of weak activity and is best left untouched.

One such parameter is the ‘Hammer’ price pattern in candlestick charts. This happens when a stock trades significantly lower than its opening, but moves up to close near the opening price. In this hammer-shaped candlestick, the lower shadow is at least twice the size of the real body.

The candlestick body is derived from the opening and closing prices, while the shadow captures the high and low prices for the period.

These patterns emerge after a price decline with buyers absorbing the selling pressure and push up the market price back around the opening price.

Hammer candlesticks can be seen as a potential signal for upward price reversal.

If we look at the Nifty 500 pack, we get a list of 21 stocks that are showing a hammer pattern.

Among these, the large cap group with a market valuation upwards of Rs 20,000 crore has names like Coal India, Vedanta, Hindalco, Muthoot Finance, Jindal Steel & Power, Astral, NMDC and Phoenix Mills.

Lower down the order, in the pack of companies having a market cap between Rs 5,000 crore and Rs 20,000 crore, there are names like ICICI Securities, PVR, Chemplast Sanmar, Laxmi Organic, Granules India, PNC Infratech, JM Financial, Rites, Kalpataru Power, Jindal Stainless and Rain Industries.

Further down, in the small cap space two companies are part of the group: Mahindra Holidays and Hemisphere Properties.