Technical View: Nifty forms ‘Doji’ candle ahead of Muhurat Trading

Equities

The Nifty5o which opened with a gap on the lower failed to hold on to gains and slipped in red after rallying for four consecutive days in a row on Wednesday. It made a ‘Doji’ type of pattern for the second consecutive day in a row.

India market will open for an hour from 06:30 pm to 07:30 pm on Thursday on account of Muhurat Trading. The market will remain shut on Friday on account of Diwali Balipratipada.

Doji candlestick pattern signifies indecisiveness between bulls and bears. It could also be a sign that the current trend might be losing strength and investors should pocket some gains ahead of the long weekend.

The Nifty opened at 10,209 and slipped marginally to 10,175. It rose to a record high of 10,236.45 before closing the day at 10,210.85.

“The Nifty50 registered a Doji formation after a gap down opening as it recouped all intraday losses before signing off the truncated week. Last three trading sessions were full of caution with indecisive formations like consecutive Dojis for two days in a row and one Hanging Man kind of formation on last Monday are only pointing towards impending weakness,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Moreover, our twin momentum oscillators generated sell signal which has higher accuracy in catching short-term turning points. Added to this Bank Nifty clearly appears to have resumed its downswing with a gap down opening,” he said.

Mohammad further added that the probability of extending correction in next few regular sessions can’t be ruled out. “We advise traders not buy the dip in a hurry but to go long only on further strength above 10,251 levels,” he said.

The Nifty future closed flat to negative with the loss of 0.07 percent at 10,247. India VIX declined by 0.60 percent at 11.54. Bank Nifty has been underperforming the Nifty index as it fell down sharply and closed with the loss of 1.35 percent compared to the Nifty loss of 0.23 percent.

The index has support at 24,250 and then towards 24,000 while on the upside hurdles are seen at 24,500 and then towards 24850. The Bank Nifty has to perform if the index has to continue its up move, suggest experts.

On the options front, maximum Put OI was seen at 10,000 followed by 9,900 while maximum Call OI is at 10,200 followed by 10,300 strikes.

“We have seen Put writing at 10,000 followed by 10,200 strikes while Call unwinding was seen at 10,100 strikes. Fresh Put writing with Call unwinding is shifting its support to higher zones but intact Call writing at 10,300 is restricting its upside momentum,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“Rising Put Call Ratio with lower volatility suggests an overall bullish bias of the market. However, Bank Nifty has been underperforming and 750 points from its highs while Nifty is up by around 50 points from its previous high of 10,178,” he said.