Technical View: Nifty forms Doji pattern for 3rd day in a row; 11,888 crucial for bulls
Bulls tried to push Nifty towards 12,000 but failed to hold on to the momentum and formed a small bullish candle or Doji pattern on the daily charts.
The index breached its 5-days exponential moving average on the downside at 11,935 but bounced back after touching an intraday low near 11,900.
The index formed a Doji kind of candle for the third consecutive day in a row, which essentially indicates indecisiveness among the bulls and the bears.
The index moves in a narrow range of 11,770-12,000. A breakout above 12K or a break down below 20-day EMA placed around 11,810 could change the trend.
The index opened at 11,959 and rose to an intraday high of 12000.35. But, traders preferred to book profits at higher levels and pushed the index below 12K to touch an intraday low of 11,904. The index closed 42 points higher at 11,965.
“Nifty has been forming Dojis from the last three trading sessions but at the same time forming higher highs, higher lows that suggest that decline is being bought while resistances are intact at the upper band of the trading range,” Chandan Taparia, derivative & technical analyst at Motilal Oswal Securities told Moneycontrol.
Taparia further added that it has to continue to hold above 11,888 to witness an up move towards 12,041, then 12,100; while on the downside, support is seen at 11,888, then 11,761.
India VIX fell 3.52 percent to 14.44.
On the options front, the maximum Put OI was placed at 11,500 followed by 11,700 while maximum Call OI was placed at 12,500 followed by 12,000.
Minor Put writing was seen at 11,900 followed by 11,800 while minor Call unwinding was seen at 12,000. Options data suggests a wider trading range of 11,750-12,250.
Selling at higher levels suggests upside remains capped for Nifty in the short term. Traders are advised to remain neutral on the long side and use weakness in Nifty to create short positions with a stop loss above 12,040 on a closing basis, suggest experts.
“Bulls need a strong close above 12,039 to be back in the game and unless such a breakout occurs, the market remains vulnerable for a sell-off,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“In the next session, if Nifty breaches 11,900 on closing basis then there will be a bright chance of Nifty resuming its downswing,” he said.