Technical View | Nifty forms Doji pattern ahead of FO expiry; 16,800 to be crucial support


The Nifty50 on September 28 extended weakness for the sixth consecutive session to hit a two-month low, and closed below the psychological 17,000 mark with a nearly one percent loss, ahead of a day of monthly expiry of September futures and options contracts, tracking consistent nervousness in global counterparts.

The index has formed a Doji kind of pattern on the daily charts as the closing was near its opening levels, indicating the indecisiveness among bulls and bears about the future market trend. The index is near its crucial support level of 16,800-16,700, and if that gets broken then there could be further sharp selling in the market; otherwise, 17,000 is going to act as immediate resistance, experts said.

Banking and financial services, metal, oil and gas, and select FMCG stocks weighed down the market, while the broader markets also traded lower with the Nifty Midcap 100 and Smallcap 100 indices falling a third of a percent and half a percent respectively.

The Nifty50 opened lower at 16,870 and remained under pressure for a major part of the session to hit the day’s low of 16,820. The index ended with 149 points loss at 16,859.

“Technically, we are of the view that 17,000 would act as an immediate resistance level, below which, the correction wave is likely to continue till 16,700-16,650,” Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities said.

On the flip side, he thinks a short recovery rally is possible only after the dismissal of 17,000. Above the same, the index could move up to 17,100-17,200.

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The Nifty is having major support between 16,700 and 16,650,  which is an important retracement support level. Buying is advisable in index heavyweight stocks if the Nifty falls to 16,700 levels, the market expert said.

The volatility index remained high ahead of monthly expiry as well as the RBI monetary policy in the later part of the current week. India VIX was up by 2.44 percent to 22.10 levels, giving discomfort to the bulls.

As per the Options data, the Nifty50 is likely to trade in the range of 16,500-17,100 levels in the coming sessions. We have seen maximum Call open interest at 17,000 strike followed by 17,200 strike while the maximum Put open interest was seen at 16,500 strike then 16,800 strike.

The maximum Call writing was seen at 17,000 strike followed by 16,900 strike while there was minor Put writing at 16,700 strike then 16,600 strike.

The Bank Nifty also opened gap down by around 280 points and moved in a negative to rangebound manner for the most part of the session. It moved down towards 37,600 levels before closing with losses of 599 points at 37,760, the lowest level since August 4.

Also read – After six days of steady selloff, how much further can Nifty fall?

The banking index has formed a bearish candle on the daily scale, and has been making lower highs-lower lows over the last six sessions. If the index remains below the 38,000 mark, then the weakness could be seen towards 37,500 and 37,250 levels, whereas hurdles on the upside are placed at 38,250 and 38,500,” Chandan Taparia, Vice President, Analyst-Derivatives at Motilal Oswal Financial Services said.

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