Technical View: Nifty forms Gravestone Doji pattern on weekly charts, 15,000 is the level to watch


The Nifty50 started off the session on a strong note but profit-booking in the afternoon wiped out all gains and pulled the index down by a percent on March 12. Rising US bond yields dampened global sentiment. Banking & financials, FMCG, metals and pharma stocks came under major selling pressure.

The Nifty opened strong at 15,321.15 and extended gains to hit an intraday high of 15,336.30. A sell-off in the afternoon, however, wiped out all gains and the index hit the day’s low of 14,953.60. It settled with losses of 143.80 points or 0.95 percent at 15,031.

The index formed a long bearish candle that resembled a Bearish Engulfing pattern on the daily charts and a Gravestone Doji formation on the weekly scale. The index gained 0.6 percent for the week.

A Bearish Engulfing Pattern consists of two candles. One candle is usually a small candle, which is followed by a large black or red candlestick pattern that engulfs the short one or the previous candle.

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 depicts a fall from the intraday high and no lower shadow.

Experts believe that consolidation is expected to continue but 15,000 is likely to act as a crucial level for the trend on either side.

Traders should remain neutral on the long side, Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory at Chartviewindia said. Positional shorting should be considered below 14,950 for an initial target of 14,700 by placing a stop above 15,000 on the closing basis, he said.

“Hopes of a breakout from the late recovery of last Wednesday appears to have fizzled out as the Nifty50 gave up all the gains on Friday despite witnessing a gap up opening, which depicted a Bearish Engulfing formation on daily charts, whereas Gravestone Doji kind of formation is visible on weekly charts,” Mohammad said.

The Nifty seems to be in a sideways range and drawing support from its 20-day exponential moving average (14,957) as it bounced back after testing the 20 DEMA on four of the last five sessions, including the one on March 12. “A close below 14,950 can accelerate the selling pressure in this counter with initial targets placed around 14,680 levels and beyond that retest of recent low placed around 14,467 can’t be ruled out,” he said.

If the Nifty manages to sustain above 15,000 in the next session, then the bulls can attempt to bounce back towards 15,250 levels but upsides shall ideally remain capped around 15,300 levels, Mohammad said.

India VIX moved up by 4.61 percent from 20.74 to 21.70 levels.

On the options front, maximum Put open interest was seen at 14,000 followed by 14,500 strike, while maximum Call open interest was seen at 16,000 followed by 15,500 strike. Call writing was seen at 15,500 then 15,300 strike while Put writing was seen at 15,000 then 14,700 strike.

The options data indicates that the Nifty could see a wider trading range of 14,500- 15,500, while an immediate range be 14,800-15,300 levels.

The Bank Nifty opened gap up at 36,497.35, which was also an intraday high, but it failed to cross 36,500 and drifted lower to hit the day’s low of 35,188.05. The index settled the day with losses of 441.60 points, or 1.23 percent, at 35,496.70, forming a bearish candle on the daily scale and a Doji pattern on the weekly chart. It gained 0.8 percent for the week.

“The pattern formation on daily and weekly charts indicates sustained (that) selling pressure was seen at higher zones even after recovery at support zones. Now the Bank Nifty has to continue to hold above 35,500 to witness an upmove towards 36,000 and 36,500, while on the downside, support is seen at 35,000 then 34,750 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

On the stock front, a bullish setup was seen in Tata Power, Power Finance Corporation, Apollo Hospitals, Tata Chemicals, Power Grid and Escorts, while weakness was seen in ICICI Prudential, Bank of Baroda, TVS Motor Company, Canara Bank, Motherson Sumi, ACC, Maruti Suzuki, SBI, Reliance Industries, IndusInd Bank, Petronet LNG, Marico and Jubilant Foodworks, he added.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.