Technical View: Nifty forms Doji pattern, rally only on a close above 16,349
The Nifty continued to consolidate for the second consecutive session and managed to close 20 points higher on August 9, driven by select banks and IT stocks.
The index formed a Doji pattern on the daily charts as the closing was near opening levels. Experts expect the consolidation to continue till the index sees break-out on either side of the range (16,146-16,349).
A Doji candle indicates indecisiveness among the bulls and the bears and bounces being sold in the absence of follow-up buying interest.
Traders should remain neutral on the index by waiting for more strength to emerge in either direction, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
The Nifty opened higher at 16,281.35 and hit an intraday high of 16,320.75 but erased gains in mid-afternoon trade to hit the day’s low of 16,179.05. The index recouped losses in late trade and closed 20.10 points higher at 16,258.30.
The advance-decline ratio decisively remained skewed in favour of bears as two stocks declined for every single stock that closed in the positive terrain, Mohammad said.
The day’s only notable positive was that the Nifty smartly recovered, from intraday low of 16,179 after almost testing the bullish gap zone placed between 16,176–16,146 levels, he said. It is critical that the index sustains above the said gap area. A close below 16,146 can induce more selling pressure, with targets placed at 16,000-15,900, he said.
If the index closes above 16,349, it will signal resumption of the upmove with initial targets placed around 16,700.
India VIX remained flattish at 12.60. The stability in volatility indicates that the bulls can provide fresh momentum, said 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 16,000 strike, while maximum Call open interest was seen at 16,500 followed by 16,300 strike. Minor Call writing was seen at 16,300 then 16,200 strike, while Put writing was seen at 16,000 then 16,100 strike.
The data indicates that the Nifty can see a broader trading range of 16,000-16,500 and an immediate trading range of 16,100-16,400.
The Bank Nifty outperformed the Nifty as it was found sustained buying interest at every decline and finally closed the day with gains of 219.65 points at 36,028.90. It formed a bullish candle, given the decisive close above 36,000.
“The index has to hold above 36,000 levels to witness an upmove towards 36,250 then 36,500 levels, while on the downside, supports are seen at 35,800 then 35,500 levels,” Taparia said.
On the stock front, a bullish setup was seen in Deepak Nitrite, IRCTC, Piramal Enterprises, PVR, Tata Chemicals, Axis Bank, Tech Mahindra, IndusInd Bank, Britannia Industries, HDFC Bank, Federal Bank and ICICI Bank. Weakness was seen in NALCO, SAIL, Balkrishna Industries, Torrent Power, Muthoot Finance, Motherson Sumi Systems, BHEL, NMDC, Coal India, Mahanagar Gas, Voltas, Ramco Cements, PNB and Exide Industries, he added.