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Technical View: Nifty forms a ‘Doji’ kind of pattern

Yatheendradas C.k. at 07:42 PM - Nov 21, 2017 ( ) Views: 424

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Nov 21, 2017 04:42 PM IST | Source: Moneycontrol.com

Technical View: Nifty forms a ‘Doji’ kind of pattern; exit longs if index closes below 10,261

The index is trading well above its short-term moving averages which is a bullish sign but formation of a ‘Doji’, an indecisive pattern, does not augur well for the bulls. A clear breakout or a breakdown will decide the direction of markets in the near term.

Kshitij Anand    

The bulls managed to pick up momentum and close above its crucial resistance level of 10,300 but lost steam towards the closing of the trading day. The index closed near its opening level which made a ‘Doji’ kind of pattern on the daily candlestick charts.

A 'Doji' is formed when the index opens and then closes approximately around the same level but remain volatile throughout the day which is indicated by its long shadow on either side. The body will be insignificant which will appear like a plus sign on the charts.

The Nifty50 opened at 10,329 and closed virtually at the similar level at 10,326 thus forming a 'Doji' pattern on Tuesday. It rose to its intraday high of 10,358 which made an upper shadow and an intraday low of 810,315 which made a small lower shadow.   

The index is trading well above its short-term moving averages which is a bullish sign but formation of a ‘Doji’, an indecisive pattern, does not augur well for the bulls. A clear breakout or a breakdown will decide the direction of markets in the near term.

If the index closes below 10,261 then traders should exit long positions or partially book profits in atleast half of them. Only a break above 10,411 will restore bullish momentum, suggest experts.

“Bulls disappointed for the day as they failed to capitalise on the strength displayed in the early hours of the session as they have given up all the intraday gains only to register a ‘Doji’ kind of indecisive formation,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“This pattern after Monday’s consolidation is slightly tilting the tide in favour of the Bears at least for the immediate trading session. Hence, in the near-term defending Tuesday’s low of 10315 and pushing the Nifty beyond 10358 shall become the prime task of bulls as a breach of 10261 shall favour the bears once again,” he said.

Mohammad further added that it looks prudent for short-term traders to exit their positions if Nifty closes below 10261 levels.

On the options front, maximum Call options open interest stand at strike prices 10,500, followed by 10,400 while maximum Put options open interest stood at 10,300, followed by 10,200 strikes.

On the sectoral front, the S&P BSE Consumer Durable index rose 1.98 percent, followed by S&P BSE Healthcare index which gained 1.7 percent, and telecom which rose 1 percent. Sectors which weighed on the index include FMCG, realty as well as banking.

The S&P BSE Banking index closed 0.05 index lower at 29,207 while Nifty Bank closed 0.04 percent down at 25,757 on Tuesday.

Bank Nifty saw a profit booking since major contribution in the current rally was by PSU banks. Most analysts’ expect the market to be in range with 10200 on the downside while 10350 on the upside.

“A break of this will give us the necessary momentum in near term. We suggest being cautious and have a Buy on dips strategy with trailing stop losses around our area of support, 10200,” Mustafa Nadeem, CEO, Epic Research told Moneycontrol.


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