Technical View: Nifty forms Long Legged Doji pattern, experts say traders can short for 14,650 target
The bears dominated the proceedings on April 9 as the Nifty50 again crossed the 14,900-mark but failed to hold on to it as banks, select auto and metal stocks weighed on the sentiment, even as FMCG, IT and pharma stocks supported the market.
The Nifty50 opened higher at 14,882.65 but remained under pressure most of the day. The index climbed to 14,900 levels in the morning but slipped to to hit the day’s low of 14,785.65 in the afternoon. The index fell 38.90 points to close at 14,834.90
The index made a small bearish candle on the daily charts as the closing was lower than opening levels, while there was Long Legged Doji kind of formation on the weekly scale, as it was down 0.2 percent for the week.
A typical long-legged Doji pattern is formed when the opening price is almost equal to the closing price but there is a lot of intraday movement on either side.
Traders should remain neutral on the long side, whereas intraday traders should consider shorting below 14,785 and look for a target close to 14,650 by placing a stop above intraday high, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.
“Momentum appears to be slowly deteriorating and tilting in the favour of the bears as the index registered a Long Legged Doji kind of formation on weekly charts, whereas a small bearish candle with narrow rangebound trade is witnessed on daily charts after the failed breakout attempt of last Thursday’s session,” Mohammad said.
In the next session, if the index registers a close below 14,800, then a sharp correction can’t be ruled out, he said. In such a scenario, initial targets can be 14,459 but a retest of corrective swing low of 14,264 can’t be ruled out, he said.
To negate this kind of pessimistic outlook, the bulls need a strong close above 14,900 and in that scenario, a higher target towards 15,150–15,200 can’t be ruled out, he said.
India VIX declined by 2.58 percent from 20.31 to 19.78 levels, while on the weekly basis, it was down from 19.98 to 19.78 levels. “Lower volatility and a hold below 20-mark could continue to keep buy on declines strategy in the market,” Chandan Taparia of Motilal Oswal said.
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 15,000 followed by 16,000 strike. Minor Call writing was seen at 15,000 then 15,200 strike, while minor Put writing was seen at 14,800 strike. Options data indicates a wider trading range—14,500 to 15,200—for the Nifty.
The Bank Nifty opened negative and remained negative to rangebound for the most part of the session. Banking stocks witnessed weakness and dragged the index to the day’s low of 32,329.95. It closed with losses of 334.80 points, or 1 percent, at 32,448. It formed a bearish candle on weekly as well as daily scales.
“Long upper shadows during the day indicates selling pressure at higher zones. Now till the index remains below 33,333, weakness could continue for the downside move towards 32,000 and 31,500, while on the upside, hurdles are seen at 33,000 and 33,333-33,500 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
On the stock front, a bullish setup was seen in Cadila Healthcare, Cipla, Glenmark, Aurobindo Pharma, Sun Pharma, Adani Enterprises, Lupin, Indraprastha Gas, Sun TV Network, HUL, Tech Mahindra, Biocon, JSW Steel, Wipro, Tata Consumer Products, Titan, Marico, SRF and Pidilite Industries. Weakness was seen in Bajaj Finance, UPL, Mcodwell, NTPC, Axis Bank, ICICI Bank and Coal India, he added.