Technical View: Nifty forms Doji pattern, weekly MACD chart gives sell signal
The Nifty50 remained in the negative terrain for the most part of the session before closing moderately lower on July 9, extending losses for the second consecutive day. Select banking and financials, auto, and IT stocks were under pressure.
The index formed a Doji kind of pattern on the daily charts as the closing was near its opening levels, while on the weekly charts, there was bearish candle formation as the index fell 0.2 percent. Experts advised avoiding buying on dips.
A Doji candle indicates there is some indecisiveness among the bulls and the bears and bounces were being sold in the absence of follow-up buying interest.
India VIX fell by 4.55 percent from 13.56 to 12.94 levels today after rising sharply in the previous session, which has given some stability to the market.
The Nifty50 opened lower at 15,688.25 and hit an intraday low of 15,632.75. The index managed to recoup losses after an initial hour to hit a day’s high of 15,730.85 but failed to hold on to the same recovery and immediately slipped into the red. It finally settled with losses of 38.10 points at 15,689.80.
Meanwhile, the Moving Average Convergence and Divergence, popularly known as MACD, gave a ‘sell’ signal on the weekly charts, which indicates things are moving in favour of bears.
“Nifty50 appears to have found some support around its preceding corrective swing low of 15,635 levels. After testing the same level, the index bounced back resulting in a Doji kind of indecisive formation on daily charts whereas weekly charts witnessed a small bearish candle with a narrow trading range of 282 points,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
In the next couple of trading sessions if Nifty manages to sustain above 15,632 levels then a new trading range may emerge between 15,900 – 15,630 levels whereas failure to sustain above 15,630 on the closing basis can eventually drag down the index towards the zone of 15,450 – 15,400 levels, according to him.
On the technical oscillator/indicator front, things are deteriorating in favour of bears with the weekly MACD chart generating a sell signal after briefly remaining in a buy mode for three preceding weeks, he said.
Mazhar Mohammad of Chartviewindia.in said it looks prudent to avoid buying the dips, and intraday traders can go short below 15,630 and look for a modest target of 15,500 levels by placing a stop above intraday high.
On the options front, maximum Put open interest was seen at 15500 followed by 15000 strike while maximum Call OI was seen at 16000 followed by 15800 strike. Minor Call writing was seen at 15700 then 16100 strike while minor Put writing was seen at 15200 then 15300 strike. Option data indicated that an immediate trading range for the Nifty50 could be 15,500 to 15,900 levels.
Bank Nifty opened negative at 35,163.75 and moved in a zig zag fashion throughout the day. Weakness was seen in the banking stocks and it remained overpowered by the bulls for the most part of the session to close with losses of 202.20 points at 35,071.90.
The index formed a bearish candle with a long lower shadow on daily while a Doji candle on a weekly scale which indicates tug of war between bulls and bears for a decisive move. “Bank Nifty has to hold above 35,000 levels to move up towards 35,250 and 35,500 while on the downside support is seen at 34,750 and 34,500 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
He said a bullish setup was seen in Tata Steel, Bajaj Finserv, Page Industries, Vedanta, Glenmark Pharma, NALCO, Max Financial Services, Torrent Pharma, Bharti Airtel, Grasim, Hindalco, Divislabs, Shriram Transport Finance, Ramco Cements, Mahanagar Gas, Ambuja Cements, Tata Consumer Products and Tata Power while weakness was seen in Bajaj Auto, HPCL, TCS, Container Corporation, Gail, Wipro, Hero MotoCorp, Britannia Industries and Reliance Industries.
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