Investors can initiate long positions once Nifty closes above 9,600-9,620 on a closing basis.
The Nifty remained volatile on the last trading day of the week but closed near its opening level despite wide movement on either side making a ‘Doji’ and a pattern similar to an ‘Inside Bar’ on the daily candlestick charts on Friday.
A 'Doji' is formed when the index opens and then closes approximately around the same level but remain volatile throughout the day which is indicated by its long shadow on either side. It appears like a cross or a plus sign.
The Nifty50 opened at 9,595.45 and closed virtually at the similar level at 9,588.05 thus forming a 'Doji' kind of pattern. It rose to its intraday high of 9,615.85 which made a small upper shadow and fell to an intraday low of 9,565.50 which made a long lower shadow.
As per theory, 'Doji' chart patterns are commonly seen in periods of consolidation but given the price movement witnessed throughout this week, technical experts expect the market to break on the upside.
Investors can initiate long positions once Nifty closes above 9,600-9,620 on a closing basis. However, if the index holds below 9,580, selling pressure could drag the index towards 9,550-9,530.
“The Nifty registered a Doji kind of indecisive formation as it signed off the session almost at a point where it has opened the day. Besides, Friday’s trading range was curtailed inside previous trading session’s range suggesting that for time being market is making an attempt to consolidate above its critical support levels placed around 9520,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“As long as 9,520 is not breached on a closing basis the trend can remain sideways and positively biased. Interestingly one of our momentum oscillators has generated a buy signal on lower time frame charts suggesting that trend is slightly tilting in favour of bulls at this point in time,” he said.
Mohammad further added that if market trades above 9,600 levels for at least one hour in next trading session, we advise short-term traders to initiate fresh long positions without any worry.
On the options front, maximum Put OI was seen at strike price 9,500 followed by 9,600 while maximum Call OI was seen at strike price 9,700 followed by 9,600.
Fresh Call writing was seen at strike prices 9,700 and 9,600 in the last few sessions which is restricting it to surpass its recent highs while intact Put writing at strike price 9,600 and 9,500 are supporting the market on declines.
The derivative data suggests that some further consolidation is likely to continue. Even in Friday's session, the index moved within the previous session trading range which made an 'Inside Bar' kind of pattern on charts.
Inside bar is a two-candlestick pattern in which the recent bar is within the high to low range of the prior bar.
“The Nifty index formed an inside bar on the daily chart as traded inside the trading range of the last session. It has been making lower top – lower bottom and trading in a falling channel on the hourly scale,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.“Now, it has to cross and hold above 9620 to witness a bounce back towards its hurdle of 9,650 and 9,680 zone while a hold below 9580 could drag the index towards 9,550 and 9,530 zone,” he said.