Technical View: Nifty forms Doji kind of pattern; narrow range raises concern over uptrend

September 11
18:29 2019

After opening higher, the Nifty 50 remained rangebound with a positive bias throughout the session on September 11. Banks, auto, metals, and realty stocks rallied on the hope of stimulus from the finance ministry.

The index maintained the psychological 11,000 levels and saw a lot of resistance in the range of 11,050-11,100 levels, forming a small-bodied bullish candle resembling a Doji kind of pattern on daily charts.

The formation of a Doji candle after a bullish candle indicates there is some indecisiveness among the bulls as well as the bears.

Experts feel the narrow range raised a bit of concern over further uptrend on the index but if it trades above 11,050 in the coming session then there could be a further rally.

The Nifty 50 opened higher at 11,028.50 but remained in a range of 44 points by hitting an intraday high of 11,054.80 and low of 11,011.65. The index closed 32.70 points higher at 11,035.70.

“Albeit Nifty50 closed in a positive terrain trading range remained extremely narrow with 44 points but on the back of stronger positive advance/decline ratio as 2 stocks rallied for every single stock declined. However, this narrow range should be a cause for concern as Nifty failed to sustain above its resistance point of 11,042 levels on a closing basis,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said selling pressure may get enhanced in the next trading session if the index trades below 11,011 levels for at least 30 minutes. Short term weakness may get confirmed on a close below 10,990 levels.

Contrary to this, the index may strengthen if it trades above 11,054 on an intraday basis. This can drive the rally further toward 11,170 levels, he added.

India VIX fell 3.01 percent to 15.37 levels. It has been making lower highs – lower lows from the last four sessions and recently corrected from 18.31 to 15 zones giving some stability to the market.

On the options front, maximum Put open interest was at 10,800 followed by 11,000 strike while maximum Call open interest was at 11,200 followed by 11,500 strike. Minor Call writing was seen at 11,300 and 11,200 strikes while Put writing was seen at 10,900 and 11,000 strikes.

Options data suggests the Nifty could trade in a range of 10,800 to 11,250 levels, experts feel.

“The derivatives data point to huge activity at 11,000 strike on the puts front making it the point of control for the next trading session. The overall concentration indicates the range to be 11,200 to 10,800. We believe a close above 11,100 should trigger a short-covering that can drive markets further higher. One should be cautious on the shorts side. A break above 11,100 would likely be seen with an increase in volatility,” Mustafa Nadeem, CEO, Epic Research said.

Bank Nifty has been forming higher highs – higher lows from last four trading sessions and supports are shifting higher. The index closed 1 percent higher at 27,776.20 and formed a bullish candle on the daily scale.

“The index surpassed its falling supply trend line by connecting swing highs of 31,660, 30,769, 28,277 and 27,500 levels. Now it has to continue to hold above 27,500 levels to witness further move towards 28,000 then 28,300-28,500 levels while medium-term support shifted to 27,250 levels,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.Get access to India’s fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code “GETPRO”. Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.

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