Technical View: Nifty forms ‘Doji’ type candle ahead of March expiry

Market

The bulls failed to hold the momentum after a strong start on Tuesday as Nifty closed with an indecisive candle ‘Doji’ on the daily candlestick charts.

The Nifty50 took support at its 5-days exponential moving average (DEMA) before bouncing back above its crucial 200-DMA placed at 10,177.

Doji is more of an indecisive pattern where both bulls, as well as bears, fail to regain control. Formation of a Doji after a ‘Long White Day’, a Doji pattern signals nervousness on D-Street and we could see the index turning volatile on the expiry day as well.

The Nifty index witnessed selling pressure near its crucial resistance levels around 10,200 levels. But, nevertheless, it was a strong day on D-Street as market gains for the 2nd day in a row to close at over 1-week high. More than two shares advanced for every share falling on the BSE.

The index which opened at 10,188 rose to an intraday high of 10207 before bears took and control and pushed the index below 10,200. The Nifty hit an intraday low of 10,139 before closing the day at 10,184, up 53 points.

“Albeit Nifty50 witnessed a strong opening, as bulls failed to capitalise on the same, at the end of the day market registered indecisive formation called Doji which is a cause of a concern. Usually, in normal market conditions this kind of pattern shall lead to short-term weakness if followed by a weak trading session,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Hence, on the intraday basis if it consistently trades below 10139, for atleast one hour, then it may lead to intraday selling pressure whereas a close below 10114 shall strengthen bears once again,” he said.

Mohammad further added that unless a fresh round of short covering is seen on expiry session with a close above 10227 the chances of a strong come back for bulls shall fade away in the near term.

India VIX moved down by 1.10 percent at 15.02. On the options front, maximum Put open interest is placed at 10000 followed by 10100 strikes while maximum Call open interest is at 10200 followed by 10500 strikes.

“We have seen Put writing at 10150 and 10200 strikes while Call writing is seen at 10200 then 10250 strikes. Option band signifies a narrow trading range between 10100 to 10250 levels,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“Nifty index got stuck in a range in the second half of the trading session ahead of expiry and formed a Doji candle on the daily scale which implies indecisiveness in the market,” he said.

Taparia further added that the index has to hold above 10141 to extend its bounce towards 10276 then 10333 zones while on the downside supports are seen at 10080 and 10050 zones.