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Technical View: Nifty forms Doji pattern, sideways corrective trend likely if index breaks 12,213

January 10
19:28 2020

The Nifty failed to hold on to its new record and closed off the day’s high on January 10.

The likely signing of the US-China phase one trade deal in the coming week and stable oil prices saw the index continue its uptrend for the second consecutive session but it formed a Doji pattern on daily charts.

A Doji candle after a bullish candle indicates there is some indecisiveness among the bulls and the bears, as the index closed near to opening levels and bounce were being sold in the absence of follow up buying interest.

For the week, the index gained 0.24 percent and formed a small bodied bullish candle on the weekly scale as closing was higher than opening value.

Experts expect the index to see sideways corrective phase in the coming days if it breaks the crucial 12,213 levels.

India VIX moved up marginally by 0.55 percent to 14.07 levels.

The Nifty after gap-up opening at 12,271 extended gains to cross the psychological 12,300-mark for the first time and hit a record high of 12,311.20 intraday, but wiped out some gains post lunch and hit the day’s low of 12,213.20. The index closed 40.90 points higher at 12,256.80.

“The inability of bulls to sustain at higher levels despite registering new life time highs is clearly suggesting lack of conviction on their part about sustainability of the rally,” Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.

Moreover, some momentum oscillators on weekly charts generated sell signals accompanied with negative divergences, he said. If the index fails to sustain above 12,213 in the next trading session, then it can under go selling pressure on intraday basis, which may set the tone for a sideways corrective phase.

According to him, if the correction in next couple of days drags down the index into the bullish gap zone of 12,132–12,044, then that should be seen as an opportunity to create fresh longs. “Contrary to this, a strong close above 12,300 levels can extend the upswing towards 12,450 levels.”

For the time, Mohammad advised traders to buy either on correction or on a strong close above 12,300.

The Option data indicates that the Nifty could trade in the 12,000-12,400 range in the coming days.

On options front, maximum Put open interest was seen at 12,000 followed by 11,500 strike, while maximum Call open interest was at 12,500 followed by 12,400 strike. Call writing was seen at 12,600 followed by 12,500 strike while Put writing was seen at 12,300 then 12,200 strike.

The Bank Nifty opened on a positive note and moved towards 32,350 levels, but remained volatile in a wider trading range of 400 points for most part of the session.

The index closed five points higher at 32,097.40, forming a small bodied candle on the daily scale, while a hammer candle was seen on the weekly chart, which implies that decline was being bought into. For the week, it gained 0.09 percent.

“Going forward, it has to hold above 31,750 level to witness an upmove towards 32,500-32,600 levels; while on the downside supports are seen at 31,500 then 31,250 levels,” Chandan Taparia, 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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