Technical View: Nifty forms Gravestone Doji pattern, suggests lack of conviction among bulls
The Nifty wiped out 75 percent of intraday gains in late trade and closed off day’s high on November 15. Reliance Industries, banks and Bharti Group stocks supported the market, but FMCG, oil retailers, auto and technology stocks were a drag.
The index failed to hold 11,900 levels and registered a bearish reversal formation called Gravestone Doji in which open, close and low of a candle are equal or similar but with a long upper shadow.
Weekly charts also witnessed the indecisive Doji formation for the second consecutive week. The index closed flat for the week.
After opening higher at 11,904.20, the Nifty hit an intraday high of 11,973.65, but saw some profit booking in the late trade and failed to hold 11,900 levels. The index closed 23.40 points higher at 11,895.50.
The intraday sell-off with long upper shadow, from the highs of 11,973, clearly suggests a lack of conviction on the part of bulls at higher levels, experts say.
“Interestingly, this kind of behaviour is occurring on the back of indecisive Doji-kind of formations on weekly charts, pointing towards dwindling momentum. Hence, in the next session if the Nifty slips below 11,891 levels then initially it should head towards 11,802 levels and breach of this shall further accelerate selling pressure, with ideal targets placed around 11,700,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.
He said upsides shall remain capped around 11,973 until a fresh breakout is witnessed. He advised traders to remain neutral on the long side, whereas intraday traders could create fresh shorts below 11,891 and look for a target of 11,800.
India VIX fell by 3.96 percent to 15.03 levels.
On the monthly options front, maximum Put open interest was seen at 11,600 followed by 11,500 strike, while maximum Call open interest was seen at 12,000 followed by 11,800 strike.
Call writing was seen at 12,000 followed by 12,100 strike, while marginal Put writing was seen at 11,500 then 11,600 strike.
Above options data suggests that the Nifty could trade in a broader range of 11,700 to 12,100 in the coming days.
The Bank Nifty opened positive and extended its gains towards the 31,165-mark but witnessed some profit booking in higher zones in the last hour of the session. The index closed 0.87 percent higher at 31,016.50 and formed a bullish candle on the daily scale while forming higher highs – higher lows from past five weeks.
“The index has to continue to hold above 30,800 levels to witness an upmove towards 31,250 then 31,500 levels, while on the downside, major supports are seen at 30,400 levels,” Chandan Taparia, Vice President | Analyst-Derivatives, 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.