Technical View: Nifty forms Doji pattern, buying opportunity only above 15,900
The Nifty extended the rally after a strong opening and stayed in the positive terrain through the session to close above 15,800 on July 13, driven by banking & financials, select metals, auto, and pharma stocks.
The index formed a Doji pattern on the daily chart as the closing was near opening levels. A Doji candle indicates indecisiveness among the bulls and the bears and also that bounces were being sold in the absence of follow-up buying interest.
It will be prudent to remain neutral on the Nifty as the best buying opportunity will arise only on a strong close above 15,900, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
India VIX fell by 2.83 percent from 12.99 to 12.62 levels. “A decline in the VIX after the recent spurt has again given stability to the market to commence the next move,” said Chandan Taparia of Motilal Oswal.
After opening sharply higher at 15,794, the Nifty gradually extended gains to hit an intraday high of 15,820.80 in late trade. The index climbed 119.80 points to close at 15,812.40.
“Albeit Nifty closed with a three-digit gain by the end of the day, it registered a Doji kind of indecisive formation as the bulls failed to build on to the gains of the gap-up opening. Hence, it becomes critical for this index to sustain above 15,744 levels in next trading session,” Mohammad said.
If the index manages to defend 15,744 and goes past 15,820, chances of heading towards the upper end of the trading range, placed at around 15,900, remain high, he said.
As the market is in a 300-point consolidation mode between 15,900 and 15,600, if the Nifty breaches 15,744 on the downside, it can retest the lower end of the band towards 15,630, he 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 15,800 strike. Call unwinding was seen at immediate strikes with minor Call writing at 16,200 strike, while minor Put writing was seen at 15,800 then 15,000 strike.
The data indicates an immediate trading range of 15,600-16,000 for the Nifty in the coming sessions.
The Bank Nifty opened gap up at 35,480.05 and moved in the positive territory throughout the day. Selective heavyweight banking stocks took the index to 35,727 and it closed the day 474.50 points higher at 35,673.40.
The index formed a bullish candle on the daily scale and continued to form higher highs-higher lows from the last two sessions.
“The Bank Nifty has to hold above 35,500 to move up towards 36,000 and 36,250 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, he said a bullish setup was seen in MRF, Indiabulls Housing Finance, Apollo Tyres, Aditya Birla Fashion, ICICI Bank, Grasim, HDFC, Axis Bank, Voltas, NTPC, Lupin, JSW Steel, Ashok Leyland and IndusInd Bank. Weakness was seen in Adani Ports, Mcdowell, Dabur, HCL Technologies, Sun TV Network and Tech Mahindra.