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Technical View: Nifty forms Doji pattern on weekly charts, directionless trade expected to continue

Mazhar Mohammad of advised traders to remain neutral whereas positional traders with high risk appetite can consider shorting on a close below 12,850 levels.

November 27, 2020 / 04:44 PM IST

The Nifty50 closed with a marginal loss after rangebound trade and formed a small bearish candle on the daily charts on November 27. Traders seem to have turned cautious amid uncertainty over the efficacy of the COVID-19 vaccine and ahead of Q2 GDP data that was to be released later in the day.

The index gained 0.9 percent for the week and formed a Doji pattern on the weekly scale as closing was near the opening level.

A Doji candle indicates indecisiveness among the bulls and the bears and bounces being sold in the absence of follow-up buying interest.

Experts say directionless trade may continue till the index decisively closes above its intraday record high of 13,145.

Traders should remain neutral whereas positional traders with a high-risk appetite can consider shorting on a close below 12,850 levels,  Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at told Moneycontrol.

After opening marginally higher at 13,012.05, the Nifty traded in a range of more than 100 points. The index hit an intraday high of 13,035.30 and a low of 12,914.30 before closing 18 points down at 12,969.

The Nifty50 remained choppy as it traded inside a narrow range of 121 points before signing off the session with a bearish candle, whereas weekly charts witnessed the indecisive Doji formation, hinting that bulls were clueless on direction ahead, Mohammad said. "Hence, strength in this market shall not be expected unless it closes above 13,145 levels," Mohammad.

If the index closes below 12,858, then it can be treated as an initial sign of weakness. A close below 12,790 will lead to the resumption of downtrend, paving the way for the much-needed corrective downswing. In that scenario, eventual targets on the downside would be around 12,390, Mohammad said.

If the index sustains above 13,000 in the next session on a closing basis, then it shall remain rangebound between 12,790 and 13,100 for a couple of days before takes off critical levels in either direction, he said.

Ashis Biswas, Head of Technical Research at CapitalVia Global Research Limited-Investment Advisor also said the lacklustre trend is expected to continue in the market.

"While a breakout above 13,040 is the key factor from a short-term perspective. Anything above this level market to gain momentum, that could lead to an upside projection till 13,130-13,140 level," he said.

The volatility declined further with the India VIX closing below the 20-mark, which could remain a support for the bulls.

The Bank Nifty opened higher at 29,622 and also witnessed volatility like Nifty50. The index closed 59.25 points higher at 29,609 after hitting an intraday high of 29,716.85 and a low of 29,368.70, forming a Doji pattern on the daily charts.

The index gained 1.3 percent for the week and formed a Doji pattern on the weekly scale too as closing was near to opening levels.

Broader markets turned strong as the Nifty Midcap index was up 2.7 percent and Smallcap up 3 percent amid positive breadth. About two shares advanced for every share declining on the NSE, which, experts say, indicates that the bulls have a strong hold.

Sunil Shankar Matkar
first published: Nov 27, 2020 04:44 pm