Technical View: Nifty forms ‘Doji’ kind of pattern on charts; book partial profits

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The Nifty50 rose to a record high on Tuesday but witnessed some profit taking towards the close of the session. The index made an indecisive candle in the form Doji which suggests that neither bulls nor bears were able to gain control over the market.

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.

Indian market will remain shut on Thursday and Friday on account of Diwali where it will open for an hour only and Diwali Balipratipada on Friday.

The Nifty opened at 10,227 and slipped marginally to 10,212. It rose to a record high of 10,215.85 before closing the day at yet another closing high of 10,234.45.

“It was a day of consolidation on the bourses as Nifty50 moved in a narrow range of 38 points before signing off the day with an indecisive formation which resembles Doji. This kind of pause is pretty much warranted as markets reached overbought zones after a sharp run-up witnessed in last 4 trading sessions,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Markets may undergo a correction in short-term if they were to close below 10,200 levels in next trading session. Hence, it looks inevitable for the Nifty50 to sustain above 10,250 levels in immediate trading session to avoid any short-term damage,” he said.

Mohammad advises short-term traders to book part profit, ahead of the long weekend, in next trading session as indices trade around 10,250.

India VIX moved up by 2.65 percent at 11.61. Overall, lower volatility with historical high Put Call Ratio suggests that Put writers are holding the tight grip on the market thus downside seems to be limited.

On the options front, maximum Put OI was seen at 10000 followed by 9900 strikes while maximum Call OI was seen at 10200 followed by 10300 strikes.

Fresh Put writing was seen at 10,200, 10,250 and 10,300 strikes while Call writing was seen at 10,200 to 10,400 strikes.

“Option data suggests that supports are shifting higher but Call writing at 10,300 could restrict momentum or pace of buying interest,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“Nifty index made a new lifetime high of 10,251.85; however, momentum was missing as it formed a small candle and traded in a range of around 38 points for the entire day,” he said.

Taparia further added that the index has to hold above 10,250 zone to extend its move towards 10,300 then 10,400 while supports are seen at 10,170 then 10,150.