Technical View: Nifty forms #39;Doji#39; pattern; 10,976 next decisive levels for further uptrend

July 11
18:28 2018

The Nifty50 which started on a mildly positive note failed to gain momentum seen in previous three consecutive sessions and closed flat on Wednesday despite sharp weakness in the global peers after the United States issued new list of Chinese products worth $ 200 billion for potential 10 percent tariffs.

The market took a breather after three-day of gains indicated that investors looked cautious ahead of June CPI inflation and May industrial output data due tomorrow.

The 50-share NSE Nifty index formed an indecisive pattern known as ‘Doji’ on the daily candlestick charts, which also resembles ‘Spinning Top’ kind of pattern.

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. It appears like a cross or a plus sign.

Spinning Top is often regarded as a neutral pattern which suggests indecisiveness on the part of both bulls as well as bears. It can be formed in an uptrend as well as in a downtrend.

The Nifty50 after opening at 10,956.40 traded in a range of 54 points (10,976.65-10,923.00) before closing 1 points higher at 10,948.30.

This can be a healthy pause after a three-day gains but the index needs to close above 10,976 levels (which was today’s intraday low) to resume upward trajectory and reclaim 11,100 levels, experts said.

“It appears to be the day of consolidation on the bourses as Nifty50 signed off the session almost where it opened which resulted in Doji kind of formation,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said it can be a healthy pause as, after hitting a bottom of 10,557, there were only 2 negative sessions out of 9 and hence it can be some sort of profit booking and traders are advised not to read too much into this pause.

Trend will not favour bears unless the index closes below 10,860 levels and till then any dip shall be considered as an opportunity to go long, he feels. “Strength in the indices shall reemerge once bulls manage a close above 10,976 levels with an initial target placed around 11,100.”

India VIX moved up by 3.06 percent at 12.77 levels. Spurt in VIX after the decline of last five sessions have given a pause in positive momentum.

On the option front, maximum Put open in interest (OI) was seen at 10,600 followed by 10,700 strike while maximum Call OI was at 11,000 followed by 10,800 strike.

Significant Put writing was seen at 10,800 and 10,900 strikes while Call writing was seen at 11,000 and 10,900 strike.

Option band signifies an immediate trading range in between 10,880 to 11,000 zones, experts said.

“Nifty index opened flattish and remained range bound for the most part of the trading session. It failed to hold its gains but has been making higher highs – higher lows from last four trading sessions. It formed a Spinning Top candle on a daily chart which indicates that bears are trying to defend psychological 11,000 zones,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Securities told Moneycontrol.

He said now till the index holds above 10,880 it could extend its gains towards 11,000 then life time high of 11,171 while on the downside supports are seen at 10,835 then 10,770 levels.

Bank Nifty failed to surpass previous day’s high and remained under pressure for the most part of the trading session. It formed a Bearish candle on a daily scale and follow up buying missing at higher levels.

“Now it has to continue to hold above 26,750 zones to extend its move towards 27,100 zones while on the downside support is seen at 26.600 zones,” Taparia said.

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