Technical View: Nifty forms #39;Doji#39; pattern ahead of RBI rate decision; 10,747 crucial for bulls
The market ended rangebound session lower on Tuesday, snapping six-day winning streak as traders remained cautious ahead of interest rate decision by Monetary Policy Committee on Wednesday.
The Nifty50 traded lower in a range of 57 points for major part of the session and formed small bearish candle which resembles a ‘Doji’ kind of pattern on the daily 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. It appears like a cross or a plus sign.
The index has to cross 10,950 levels if it wants to conquer psychological 11,000 levels, but if it decisively breaks 10,747 then there could be more selling pressure, experts said.
The Nifty50 after opening flat traded higher for a minute to hit an intraday high of 10,890.95, followed by correction for rest of the session. The index touched a day’s low of 10,833.35 in late morning deals, followed by a bit of recovery in the last couple of hours of trade which helped to cut losses at close. It closed 14.30 points lower at 10,869.50.
“Nifty50 registered a Doji kind of indecisive formation after rightly moving in a narrow range of 57 points ahead of monetary policy event. However, momentum oscillators on lower time frame charts generated sell signals which is a cause for concern suggesting a near term cap for upsides,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said post event outcome if indices fail to rally beyond 10,950 levels then that can be a sign of near term weakness for this market.
Short term breakdown will be confirmed on a close below 10,747 levels, he added. Contray to this a close above 10,950 can initially take the indices towards 11,069 levels, according to him.
As market is likely to await election result outcome there may not be a compelling low risk trading opportunity even after monetary policy; hence, traders are advised to remain extremely stock specific with a neutral bias, Mazhar said.
India VIX fell by 1.81 percent to 17.89 levels. On the options front, maximum Call open interest (OI) was seen at the 11,000 strike price followed by 10,900 and 11,100 strikes while maximum Put open interest was seen at the 10,500 strike price followed by the 11,000 and 10,700 strikes.
Meaningful Call writing was seen at 10,900 followed by 11,200 and 11,400 strikes whereas Put writing was seen at the strike price of 10,800 followed by 10,600 and 10,500 strikes.