Technical View: Nifty forms ‘Doji’ candle for second day; keep a stop below 10K
Investors who are holding long positions can continue to remain long with a stop loss below 10,000 levels.
The Nifty50 opened with a gap on the upside but failed to add momentum and closed just above its opening level making a ‘Doji’ kind of candle for the second consecutive day in a row on Tuesday.
A 'Doji' is formed when the index opens and then closes approximately around the same level. However, it remains volatile throughout the trading day which is indicated by its long shadow on either side. The candle appears like a cross or a plus sign.
The Nifty50 opened at 10,013.70 and closed slightly above that level at 10,016.95, thus forming a Doji pattern. It rose to an intraday high of 10,034 making an upper shadow and fell to an intraday low of 10,002.30 which made the long lower shadow.
A 'Doji' is a neutral chart pattern and hence, investors should not make their trading decision based on today’s chart pattern and wait for a couple of more trading sessions. Investors who are holding long positions can continue to remain long with a stop loss below 10,000 levels.
Investors who want to play safe ahead of the earnings season can look at booking partial profits and probably re-entering at lower levels.
“The Nifty50 registered a Doji kind of indecisive formation for the second consecutive day in a row. This kind of back to back indecisive patterns can be a harbinger of a big move in either of the directions,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
As none of the technical momentum oscillators generated a sell signal on lower time frame charts there can be some more leg room on the upside.
“Bank Nifty which has underperformed for the last couple of trading sessions is slowly creeping upwards and appears to have registered a breakout,” said Mohammad.
He further added that traders are advised to go for part profit booking around 10,080 levels and continue to hold remaining positions with a stop below 10,000 on a closing basis.
India VIX moved down by 2.45 percent at 11.11 and overall lower volatility suggests a buy on decline sentiment.
On the options front, maximum Put OI was seen at strike prices 9,800 followed by 9900 and then towards 10,000 while maximum Call OI was intact at 10000 followed by 10100 strikes.
Mid and smallcap index outperformed Nifty with both indices gaining nearly 1 percent each. The rupee seems to be strengthening again which is positive for the overall sentiment.
“Sector-wise, Pharma and Banking held up for the session whereas oil marketing and FMCG underperformed. Midcap indices outperformed in trade today with nearly 200 stocks hitting fresh 52 week highs on the BSE,” Nikhil Kamath, Co-founder & Head of Trading, Zerodha told Moneycontrol.“Overall, we remain cautious on the markets and would not advise taking fresh positions at this juncture,” he said.