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Technical View: Nifty forms Doji pattern, 7,500 level crucial ahead of FO expiry

March 24
18:28 2020

The Nifty50 recouped some of the day’s losses to close 2.5 percent higher amid volatility on March 24, tracking positive global cues on the hope of a $ 2-trillion stimulus package from the United States.

To give relief to the people and businesses as coronavirus disrupts life and economy, Finance Minister Nirmala Sitharaman announced a raft of changes on the regulatory front and extended deadlines for many compliances, cheering the market.

The 50-share benchmark recovered 300 points from the day’s low, hit in the morning trade, to close a shade above 7,800 and formed a small bearish candle that resembled a Doji pattern on daily charts.

A Doji candle indicates indecisiveness among the bulls and the bears, as the index closed near the opening levels and bounces were being sold in the absence of a follow-up buying interest.

The RSI oscillator is showing positive divergence on the daily scale but there is no sign of reversal seen on price front. Experts say 7,500 will remain a crucial level for the next session ahead of the expiry of March contracts on the 26th.

Considering the fact that Nifty has, so far, failed to register a follow through buying after a positive close, traders should wait for one more positive close in the next session before deciding on long-side trading positions.

The Nifty opened sharply higher at 7,848.30 but fell to the day’s low of 7,511.10 in the initial hour itself. It then showed immediate recovery and hit the intraday high of 8,036.95 in the last hour of trade as the Finance Minister announced relief measures. It closed at 7,801.05, up 190.80 points or 2.51 percent.

“Finally, the bears appear to be clueless about the road ahead on the downside, as Nifty50 registered a Doji kind of indecisive formation in a session that favoured bulls but was marked with volatile swings in both directions. Hence in next trading session, if the index manages to defend 7,511 levels on intraday basis then eventually it can pave the way for further shortcovering on the expiry day,” Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.

He said though uncertainty continued on the long-side move, a consolidation could be expected if the Nifty sustains above 7,511 n the next trading sessions.

“If for any reason 7,500 is breached, then the downswing shall initially get extended towards 7,350 levels and below that, 6,850 can’t be ruled out where on a pullback attempt, bulls shall face their initial challenge in the zone of 8,159 – 8,200 levels and strength can be expected on a close above 8,200 levels,” he added.

Volatility remained on the higher side. India VIX made a high of 86.63 during the day, which is closer to 2009 high of 87.53 and 2008 high of 92.53. It rose 16.15 percent to settle at 83.60.

Option data indicates the Nifty could trade in a wider range of 7,500 to 8,300 levels. Maximum Call open interest was at 12,000 then 10,000 strike while maximum Put open interest was at 7,000 then 7,500 strike. Marginal Call writing was seen at 8,300 and 8,400 strike while Put writing was seen at 7,000 to 7,800 strikes.

The Bank Nifty continued its underperformance for third consecutive session, trailing the benchmark index. The banking index has seen decent recovery from lower levels and formed a Hammer candle on the daily chart. The index closed 189.65 points, or 1.12 percent higher, at 17,107.30.

“For the second consecutive session, the Bank Nifty closed below its support of 78.60 percent retracement level (17,517) of its previous rally from 13,407 to 32,613 and yet there is no sign of reversal in index,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

“Looking at the current scenario, traders are advised to remain light on positions as ongoing correction may continue towards 16,000 – 15,500 levels. On the flipside, resistance is placed at 18,300 – 19,000 levels,” he added.

The Nifty50 recouped some of the day’s losses to close 2.5 percent higher amid volatility on March 24, tracking positive global cues on hope of a $ 2-trillion stimulus package from the United States.

To give relief to the people and businesses as coronavirus disrupts life and economy, Finance Minister Nirmala Sitharaman announced a raft of changes on the regulatory front and extended deadlines for many compliances, cheering the market.

The 50-share benchmark recovered 300 points from the day’s low, hit in the morning trade, to close a shade above 7,800 and formed a small bearish candle that resembled a Doji pattern on daily charts.

A Doji candle indicates indecisiveness among the bulls and the bears, as the index closed near the opening levels and bounces were being sold in the absence of a follow-up buying interest.

The RSI oscillator is showing positive divergence on the daily scale but there is no sign of reversal seen on price front. Experts say 7,500 will remain a crucial level for the next session ahead of the expiry of March contracts on the 26th.

Considering the fact that Nifty has, so far, failed to register a follow through buying after a positive close, traders should wait for one more positive close in the next session before deciding on long-side trading positions.

The Nifty opened sharply higher at 7,848.30 but fell to the day’s low of 7,511.10 in the initial hour itself. It then showed immediate recovery and hit the intraday high of 8,036.95 in the last hour of trade as the Finance Minister announced relief measures. It closed at 7,801.05, up 190.80 points or 2.51 percent.

“Finally, the bears appear to be clueless about the road ahead on the downside, as Nifty50 registered a Doji kind of indecisive formation in a session that favoured bulls but was marked with volatile swings in both directions. Hence in next trading session, if the index manages to defend 7,511 levels on intraday basis then eventually it can pave the way for further shortcovering on the expiry day,” Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.

He said though uncertainty continued on the long-side move, a consolidation could be expected if the Nifty sustains above 7,511 n the next trading sessions.

“If for any reason 7,500 is breached, then the downswing shall initially get extended towards 7,350 levels and below that, 6,850 can’t be ruled out where on a pullback attempt, bulls shall face their initial challenge in the zone of 8,159 – 8,200 levels and strength can be expected on a close above 8,200 levels,” he added.

Volatility remained on the higher side. India VIX made a high of 86.63 during the day, which is closer to 2009 high of 87.53 and 2008 high of 92.53. It rose 16.15 percent to settle at 83.60.

Option data indicates the Nifty could trade in a wider range of 7,500 to 8,300 levels. Maximum Call open interest was at 12,000 then 10,000 strike while maximum Put open interest was at 7,000 then 7,500 strike. Marginal Call writing was seen at 8,300 and 8,400 strike while Put writing was seen at 7,000 to 7,800 strikes.

The Bank Nifty continued its underperformance for third consecutive session, trailing the benchmark index. The banking index has seen decent recovery from lower levels and formed a Hammer candle on the daily chart. The index closed 189.65 points, or 1.12 percent higher, at 17,107.30.

“For the second consecutive session, the Bank Nifty closed below its support of 78.60 percent retracement level (17,517) of its previous rally from 13,407 to 32,613 and yet there is no sign of reversal in index,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

“Looking at the current scenario, traders are advised to remain light on positions as ongoing correction may continue towards 16,000 – 15,500 levels. On the flipside, resistance is placed at 18,300 – 19,000 levels,” he added.

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