Technical View: Nifty forms Gravestone Doji pattern, more weakness likely if it breaks 15,730


The Nifty erased all the day’s gains in late trade and failed to hold above 15,900, which experts say is a crucial level for an uptrend towards 16,000. The index ended a tad lower and formed a Gravestone Doji pattern on the daily charts.

Weakness in IT, pharma, select FMCG and metals stocks dented sentiment. However, buying in banking & financials limited the downside.

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

Considering the volatile phase and negative advance-decline ratio which appears to have decisively tilted in favour of bears, traders should remain neutral on the long side by avoiding buying the dip in a haste, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at told Moneycontrol.

India VIX moved up by 1.7 percent from 12.06 to 12.27 levels. Lower volatility indicates a rangebound move but at the same time decline could be bought, Chandan Taparia of Motilal Oswal said.

After opening lower at 15,813.75, the Nifty rebounded immediately after and climbed up to 15,914.20. The index wiped out all gains in late trade to hit an intraday low of 15,801 and closed 16.10 points lower at 15,818.30.

“The failure of the bulls to get past 15,900 levels is emphasising the fact that markets are in a consolidation zone of 15,900 to 15,600 levels. Hence, if today’s indecisive but bearish formation with long upper shadow, which resembles a Gravestone Doji, witnesses a follow-through selling below 15,800 in the next session then ideally markets should eventually slip towards the lower end of the consolidation band,” Mohammad said.

However, in between, the bulls may find some support in the bullish gap area present between 15,762 and  15,738, registered on July 5, and a close below 15,730 will confirm more weakness, he said.

Upsides shall remain capped at 15,900 unless a breakout is witnessed above the said hurdle, which should pave the way for higher targets of 16,300, Mohammad said.

On the options front, maximum Put open interest was seen at 15,500 followed by 15,000 strike, while maximum Call open interest was seen at 16,000 followed by 16,500 strike. Minor Call writing was seen at 16,200 strike, while Put writing was seen at 15,500 then 15,600 strike.

The options data indicates an immediate trading range of 15,600-16,000 for the Nifty in the coming sessions.

The Bank Nifty opened negative at 35,173.60 but the bulls managed to pull the index towards 35,807.45. Slight profit booking was witnessed towards the fag end and the index hit the day’s low of 35,165.55 but the banking index outperformed the broader market. And it finally closed with gains of 367.20 points or 1.04 percent at 35,579.20.

It formed a bullish candle on the daily scale and gave the highest daily close of the last 22 trading sessions.

“Bank Nifty needs to hold above 35,500 to move up towards 36,000 and 36,250 levels while on the downside support is seen at 35,250 and 35,000 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

On the stocks front, a bullish setup was seen in Ramco Cements, Dr Lalpath Labs, Godrej Consumer Products, Ambuja Cements, UltraTech Cement, HDFC Bank, Bajaj Finance, IndusInd Bank, Tata Steel and Titan Company. Weakness was seen in Tata Motors, Biocon, NMDC, Motherson Sumi Systems, BHEL, Tech Mahindra, SAIL, Glenmark Pharma, TCS, Lupin, HCL Technologies and TVS Motor, he added.