Tech View: Nifty eyes US Fed outcome, forms ‘doji’ for second day in a row

The nervousness ahead of the US Federal Reserve outcome was quite evident on D-Street as Nifty moved in a narrow band of 30 points and made a ‘doji’ kind of candlestick pattern for the second day in a row.

But, there is another important pattern which traders should not overlook which is ‘inside bar’ or insider candle. Inside bar is a two-candlestick pattern in which the inside bar is smaller or within the range of prior bar.

Inside bars are common after a strong move and suggests consolidation, but it can also be formed at market turning points and act as reversal signals, but it still requires confirmation.

The US Fed started its two-day monetary policy meeting on Tuesday, and the outcome if expected later today on Wednesday. The market is already pricing in a 95 percent chance of a US interest rate increase.

The Nifty opened flat at 9,086.85. It gained strength and rose to an intraday high of 9,106.55 but could not hold gains and slipped to an intraday low of 9,075, before closing the day at 9,084.

A 'Doji' is formed when the index opens and then closes approximately around the same level but remain volatile throughout the day which is indicated by its long shadow on either side. It appears like a cross or a plus sign.

The index has been making the higher top-higher bottom formation on weekly charts and supports are shifting higher which is a bullish sign. The immediate positive trend may remain intact till it holds above the psychological 9,000 mark, suggest experts.

“The Nifty index formed an insider candle on the daily chart as it traded in a small range of 30 points. Recently, it witnessed a range breakout and registered a fresh 52 weeks high of 9,122,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“It requires a hold above 9,119 to start a fresh move towards 9,200 and 9,250 while 9,000 is likely to act as an immediate support,” he said.

It is frustrating when markets move in a tight range but a breakdown or a breakout will now decide the immediate direction of the market. Traders are advised to buy on dips towards 9,038 in the case of volatility arising out of US Fed outcome.

“The Nifty signed off the day with an indecisive formation called Doji, after moving in an extremely narrow range of 30 points, for second consecutive trading session suggesting that market is in for a corrective and consolidation phase,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“At this juncture we recommend traders to buy if Nifty trades above 9,122 levels atleast for 30 minutes or to wait for a correction and buy the dip in the zone of 9,038 – 9,013,” he said.