The Nifty50, which started on a muted note on Monday, managed to climb the wall of worries and rose above its crucial 5-day exponential moving average (DEMA) placed at 10,172. The index closed just around its opening level making a ‘Long-legged Doji’ kind of pattern.
A typical Long-Legged Doji pattern is formed when the opening price is equal or near its closing price but there was a lot of movement on both the sides. The Nifty50 opened trading at 10,176.65 and closed at 10,184.85 on Monday.
The index after opening on a muted not hit an intraday low of 10,124.50 but managed to climb back above 10,150 by afternoon trade. It hit an intraday high of 10,224.15 but failed to sustain above 10,200.
The pattern is neutral in nature which suggests that both bulls, as well as bears, failed to regain control over D-Street. However, it does require confirmation.
The pattern does suggest uncertainty but traders should wait for a breakout above 10,250 level before creating fresh long positions while a break below 10,100 level could change the trend favouring bears, suggest experts.
“The Nifty50 appears to have registered a Long Legged Doji kind of formation as it moved in a broader range of 100-point before signing off the day almost close to the point where it has opened,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“However, lack of follow through to the sharp and surprising correction witnessed on Muhurat session, aided by emergence of buying around nearby support level of 10120 can itself be considered as an advantage to bulls for time being but a confirmation of strength in indices shall come only on a close above 10251 levels,” he said.
Mohammad further added that in that scenario momentum shall once again pickup thereby driving the Nifty50 initially towards 10,400 level. Contrary to this, short-term downtrend shall resume if Nifty50 closes below 10,100 level.
India VIX fell down by 0.60 percent at 12.32. Now VIX has to hold below 12.50 to get a smooth ride else range bound move would continue for next few sessions.
On the options front, maximum Put OI was seen at 10,000 followed by 10,100 strikes while maximum Call OI was seen at 10,200 followed by 10,300 strikes.
Fresh Put writing was seen at 10,100 strikes while meaningful Call writing was seen at 10,250. Option band signifies a trading range in between 10,100 to 10,250 zones for next couple of sessions.
“The Nifty index opened positive but remained volatile as bulls and bears both were fighting hard in the market. It formed a Harami Cross candle on the daily chart as it closed near to its opening levels,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“The index has to continue to hold above 10,178 to witness an up move towards 10,250 and 10,300 while on the downside supports are seen a 10,120 then 10,080,” he said.
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