Technical View: Nifty forms #39;Doji#39; pattern, ends higher for 5th straight session; tread with caution

November 30
18:29 2018

The Nifty50 ended rangebound session flat with a positive bias on Friday, the first day of December series, forming Doji kind of pattern on the daily charts and robust bullish candle on the weekly scale.

The index continued to hold 10,850 levels for the second consecutive session and maintained positive trend for fifth straight trading day.

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.

Experts advise traders to remain cautious as multiple events (including G-20 meet, polling in Rajasthan etc) are lined up in the coming week which can influence the market direction.

The 50-share NSE Nifty after opening strong hit an intraday high of 10,922.45 in morning itself followed by rangebound move. The index slipped into red in afternoon and hit day’s low of 10,835.10, but managed to rebound in late trade and closed 18.10 points higher at 10,876.80. For the week, it gained 3.3 percent.

“It appears to be the day of consolidation on the bourses as Nifty50 registered an indecisive formation called Doji suggesting that traders are clueless about further direction of the market where as a robust bull candle is witnessed on weekly charts,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said however, despite this bullish structure traders are advised to remain cautious as multiple events are lined up next week which have the ability to influence the market direction in the near term.

Technically speaking, one can remain positively biased and look to buy dips as long as Nifty sustains above the bullish gap zone of 10,782–10757 registered on last Thursday whereas neutral to negative stance should be maintained if Nifty closes below its 200-day moving average (10,744), according to him.

In case strength continues beyond Friday’s high of 10,922 then upswing shall get extended upto 11,069 levels, Mazhar said.

The Nifty has been recovering on short covering before events. Nifty futures open interest at the start of December series is 10 percent lower than the open interest seen at the start of November series.

“This suggests the trend of closure of short positions, which may continue for a while. The immediate impact will be from the outcome of US-China discussion at the G-20 meeting,” ICICI Direct said.

The options build-up at 10,500 Put is the highest in December series while Call writing positions are still not increasing, showing signs of resilience in the market, it added.

The Bank Nifty ended the November F&O expiry on an optimistic note and well above the previous hurdle of 26,700. Participation was seen in both private and PSU banks with HDFC Bank the major contributor to the gain followed by other heavyweights.

On first of December series, the index ended 76.65 points lower at 26,862.95.

“Future premiums declined at the start of the December series indicating shorts are still high, which may be forced to cover if the Bank Nifty holds 26,500,” ICICI Direct said.

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