Mazhar Mohammad of Chartviewindia.in said sell signals on lower time frame charts accompanied with negative advance decline ratio for second day in a row is pointing towards creeping weakness in the broader markets.
The Nifty50 failed to hold psychological 11,500 levels, but late recovery helped the index close higher for sixth consecutive session on Monday, driven by banking & financials and FMCG stocks. Positive global cues also lifted sentiment.
The index closed above 11,450 levels and formed Long-Legged Doji pattern on the daily charts.
A typical long-legged Doji pattern is formed when the opening price is almost equal to the closing price but there was a lot of intraday movement on either side.
The positive momentum is expected to continue but considering weak advance decline ratio the market may see some consolidation or correction in coming sessions, experts said.
The Nifty50 after opened higher at 11,473.85 extended rally a bit and hit an intraday high of 11,530.15, but profit booking in late morning deals erased all gains and index hit a day's low of 11,412.50 amid volatility. In late trade, it managed to recoup losses and turned green to close 35.30 points higher at 11,462.20.
"Nifty50 opened the new week on a positive note but failed to hold on to its gains at higher levels which resulted in the Long-Legged Doji kind of formation as the index hovered in a larger range of around 120 points," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said though weakness in the price action is looking apparent bulls at this juncture appears to be in no mood to give up their bets as by the end of the day index is closing in positive terrain by adding some gains to its kitty.
However, sell signals on lower time frame charts accompanied with negative advance-decline ratio for the second day in a row is pointing towards creeping weakness in the broader markets, he added.
Hence, sooner than later, he expects the current momentum to stall paving the way for either sideways move or a corrective swing towards 11,230 kinds of levels going forward which can be confirmed on a close below 11,400 levels.
Contrary to these expectations if the strength continues further then the current swing shall get extend into the zone of 11,550–11,600 levels, Mazhar said.
Maximum Call open interest (OI) was seen at the 11,500 strike price, followed by 11,600 and 11,700 strikes while maximum Put open interest was seen at the 11,000 strike price, followed by 11,300 and 11,200 strikes.
Significant Call writing was seen at the strike price of 11,600, followed by 11,700 strike while Put writing was seen at the strike price of 11,500, followed by 11,400 strike.
"Benchmark index is trading with a positive note continuously for the fifth week and CCI indicator is trading in an overbought zone above 200-mark, signalling the possibility of small retracement for cooling off of oscillators in coming sessions," Shabbir Kayyumi, Head of Technical Research at Narnolia Financial Advisors said.As long as index is trading above daily pivot point placed around 11,430 levels, the up move is intact; while decisive trading below the Doji low at 11,415 will push prices towards a weekly pivot point placed around 11,324 levels, he added.