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Technical View: Nifty forms Gravestone Doji pattern; indices may trade sideways

February 11
18:28 2020

The Nifty50 recouped all the previous day’s losses and closed higher amid positive global cues, and the landslide win for Aam Aadmi Party in Delhi Assembly elections.

The index climbed over 12,100 levels, but wiped off all intraday gains in the afternoon and formed Gravestone Doji pattern on daily charts.

A Gravestone Doji is formed when opening, low and the closing price are all at a similar level. The candle has a long upper shadow that would depict a fall from the intraday high and no lower shadow.

The long upper shadow signifies selling pressure in the trade that pushed the index towards its opening level. It is considered as a bearish reversal candlestick pattern.

The index has been consolidating between 12000 and 12172 zones in the last four trading sessions where declines are being bought but supply pressure is intact at higher levels.

Experts expect a sideways trade in the coming session if the index defends 12,099, the intraday low.

The Nifty50 opened sharply higher at 12,108.40 and hit an intraday high of 12,172.30, but gradually erased all intraday gains in afternoon to touch a day’s low of 12,099. The index closed 76.40 points higher at 12,107.90.

“Albeit Nifty50 witnessed a strong opening which erased losses of last Monday, it registered a Gravestone Doji kind of formation as bulls given up almost all the intraday gains thereby forcing the index to close at its opening point which also happened to be around lowest point of the day,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

Hence, in the next trading session if the index trades below 12,099 levels then it can come under selling pressure which can eventually drag it down towards recent lows of 11,990, he said.

“Contrary to this if bulls manage to defend 12,099 levels then the sideways trend may prevail but a strong close above 12,170 is required for resumption of the up move. In that scenario initial targets on the upside can be close to 12,266 levels,” he added.

As the technical picture is bearish, he advised traders to wait for at least a strong close above 12,138 levels before initiating fresh longs whereas intraday traders shall consider a short side trade if Nifty remains below 12,099 levels for at least 30 minutes and look for a target close to 12,000 levels.

On the options front, maximum Put open interest was at 12,000 followed by 11,500 strike while maximum Call open interest was at 12,500 followed by 12,200 strike. Put writing was seen at 12,000 then 11,800 strike while Call writing was seen at 12,400 with minor Call unwinding at immediate strike.

The above-mentioned Option data indicated a wider trading range of 11,800-12,300 levels for the Nifty. India VIX fell by 2.32 percent to 13.88 levels.

Bank Nifty opened positive but failed to hold above its immediate hurdle of 31,500 and remained consolidative for the latter part of the session. It has again reclaimed its 50 DEMA and has been consolidating between 30,900 and 31,500 levels from the last four trading sessions. The index closed at 31,300.60, up 0.78 percent.

“Now it has to continue to hold above 31,000 to witness an up move towards 31,500 then 31,750 levels while on the downside support exists at 30,900–30,800 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

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