Unless the Nifty witnesses a strong close with a wide trading range, traders should avoid the long-side bets and focus on stock-specific opportunities, Mazhar Mohammad of Chartviewindia.in says.
The Nifty opened higher and remained in a positive territory throughout on August 10 as pharma and defence drove gains and formed a Gravestone Doji pattern on daily charts as the closing was near the opening level.
Given the indecisive pattern for the past few sessions, experts say the market could see selling pressure if the index breaks 11,238 levels the next day.
A Gravestone Doji is formed when opening, low and the closing price are all at a similar level. The candle has a long upper shadow that depicts a fall from the intraday high and no lower shadow.
Unless the Nifty witnesses a strong close with wide trading range, traders should avoid long side bets in index, focusing on stock-specific opportunities, Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory at Chartviewindia.in said.
But the gradual decline in VIX suggests that bulls are using declines as a buying opportunity and overall trend could remain bullish for a potential of decisive range breakout. India VIX marginally fell by 0.31 percent to 22.51 levels.
The Nifty50 started off the week at 11,270.25 and hit an intraday high of 11,337.30 and low of 11,238. The index signed off the session at 11,270.20, up 56.20 points.
"Despite a positive close, the bulls disappointed once again as the index appears to have witnessed profit booking from intraday high of 11,337 before signing off the session with almost a Gravestone Doji kind of formation," Mohammad said.
The trading range narrowed with 99 points for the day. Indecisive candle formations for four sessions in a row can at times lead to a sudden sell off in the market, he said.
"In the next trading session, if the bulls fail to hold the index above 11,238, then it can lead to an intraday sell off with initial targets of 11,140 levels whereas a close below 11,130 can confirm short-term reversal. However, on the upside, there still seems to be some leg room for the bulls to extend the upswing up to 11,341 levels," he added.
Option data indicated that the Nifty could see an immediate trading range of 11,000 to 11,500 zone for coming few days.
Maximum Put open interest was at 11,000 followed by 10,000 strike, while maximum Call open interest was at 11,500 followed by 12,000 strike. Minor Call unwinding was seen at most of the immediate strikes while Put writing was seen at 11,300 then 11,200 strike.
The Bank Nifty opened positive and extended its gains towards 22,000 zone in the first hour. Overall, it remained consolidative in a 250-point range for the most part of the session and formed a small bodied bullish candle on the daily scale, with a long upper shadow. The index settled at 21,900.30, up 146.30 points.
"Mechanical indicators have given a bullish crossover and require follow-up buying to confirm the next momentum. Now, it has to hold above 21,500 levels to witness an upmove towards 22,000 then 22,250 levels, while on the downside, the immediate support is seen at 21,250 then 21,000 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.Positive setup was seen in M&M, L&T, Amara Raja Batteries, Glenmark Pharma, Tata Motors, Cadila Healthcare, UPL, SRF, Tech Mahindra, Sun Pharma, Dr Reddy's Labs, ICICI Prudential Life, Shree Cement and ITC, while weak structure was seen in Bata India, Page Industries and MFSL.