Technical View: Nifty forms Doji pattern, experts say traders can go short below 15,700
The bears were in control of the Nifty50 and closed a percent lower on July 19, due to selling in banking & financials, auto, metals, and select IT stocks.
The index formed a Doji pattern on the daily charts as the closing was near its opening levels. 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.
For the time, “it looks prudent to remain neutral on markets but intraday traders with a high-risk appetite are advised to go short below 15,700 and look for a modest target of 15,630 by placing a stop above intraday high,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
The Nifty opened gap down at 15,754.50 and remained under pressure throughout the session. It extended losses in the afternoon to hit the day’s low of 15,707.50 before closing at 15,752.40, down 171 points or 1.07 percent.
With this sharp fall, the Nifty once again appears to have entered into a sideways phase whose lower end seems to be placed around 15,630 levels, Mohammad said.
In the next session, the Nifty needs to defend the low of 15,707 as failure to do so shall initially drag it down towards 15,630, he said. If the index sustains above 15,707, it should ideally move sideways which should facilitate a bounce into the zone of 15,836–15,882, according to him.
India VIX moved up by 8.38 percent from 11.70 to 12.68 levels. “A spike in volatility is seen due to profit booking-led decline in the market but overall lower VIX could again attract buying interest on declines,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the options front, maximum Put open interest was seen at 15,000 followed by 15,500 strike, while maximum Call open interest was seen at 16,000 followed by 15,800 strike. Call writing was seen at 15,800 then 15,700 strike, while Put writing was seen at 15,400 then 15,500 strike. Option data indicated a broader trading range for the Nifty at 15,500 to 16,000 in the coming sessions.
The Bank Nifty opened gap down at 35,070.50 and after an initial recovery, it remained under pressure for most of the session.
Banking stocks have been underperforming and facing pressure but the index managed to close above 35,000 with losses of 672.60 points at 35,079.20.
The index formed a Doji candle on daily scale and negated its higher highs-higher lows of the last five sessions.
“It has to hold above 35,000 to move up towards 35,500 and 35,800 zones while on the downside support is seen at 34,850 and 34,500 levels,” said Taparia.
On the stocks front, bullish setup was seen in Bharat Electronics, Apollo Hospitals, NTPC, ACC, Havells, NALCO, Divis Labs, Dabur, SRF, Lupin, Pidilite Industries, Colgate Palmolive and UltraTech Cement. Weakness was seen in L&T Finance Holdings, Shriram Transport Finance, HDFC Bank, M&M Financial, BHEL, Ashok Leyland, IndusInd Bank, RBL Bank, Canara Bank, Bank of Baroda, HDFC, Siemens, Bajaj Finance, Maruti, LIC Housing Finance, Cholamandalam Investment and Eicher Motors, he added.
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