Technical View: Nifty forms Doji candle ahead of Fed red decision, 21,800 likely to be crucial for further direction

The Nifty 50 after opening higher slipped into the red and hit an intraday low of 21,710, but rebounded in late morning deals and remained higher for the rest of the session, closing 22 points higher at 21,839

The Nifty 50 defended the 21,800 mark for yet another trading day and closed the volatile session moderately higher on March 20, as traders remain cautious ahead of the outcome of the two-day Federal Reserve meeting due tonight.

Going ahead, the index is expected to be in the range of 21,700-22,000 levels and if the index decisively closes below 21,800 then 21,700 may be the next support for the Nifty 50, while the immediate resistance is likely to be 21,900 and then 22,000, experts said.

The Nifty 50 after opening higher slipped into the red and hit an intraday low of 21,710, but rebounded in late morning deals and remained higher for the rest of the session, closing 22 points higher at 21,839.

The index has formed a Doji candlestick pattern on the daily charts as the closing was near opening levels, indicating the tug-of-war between bulls and bears for future market trends.

"On the daily charts, we can observe that the Nifty has taken support around the 78.6 percent Fibonacci retracement level of the previous rise from 21,530 – 22,526," Jatin Gedia, technical research analyst at Sharekhan by BNP Paribas said.

"In terms of price pattern, the daily candle has taken the form of a Doji pattern, which suggests indecision among market participants regarding the direction as both bulls and bears are trying hard to defend their respective boundaries," he said, adding this could lead to consolidation and the range could be 21,700-22,000.

As per the weekly options data, the maximum Call open interest was seen at 22,000 strike followed by 22,300 and 22,200 strikes with meaningful Call writing at 22,300 strike and then at 22,100 and 21,900 strikes, while on the Put side, the 21,500 strike owned the maximum open interest followed by 21,800 and 21,700 strikes with writing at 21,500 strike and then at 21,700 and 21,800 strikes.

The options data also indicated that 21,800-21,700 are crucial levels for further downside in the market with resistance at 22,000-22,200 levels.

Bank Nifty

The Bank Nifty was highly volatile during the session and formed a High Wave kind of candlestick pattern on the daily timeframe ahead of the US FOMC meet outcome. The index fell closer to the long upward-sloping support trendline but recouped significant losses from the day's low of 45,829 and finally defended the 46,000 mark, down 74 points at 46,311.

"Key support lies within the 46,000-45,800 zone and maintaining these levels on a closing basis suggests a continued bullish stance," Kunal Shah, senior technical & derivative analyst at LKP Securities said.

He feels immediate resistance is positioned at 47,000, coinciding with the 20DMA (days moving average), and a decisive close above this level could reignite the upward trend, targeting levels around 48,000-48,500.

The volatility also dropped below the 14 mark, giving some comfort to bulls. The India VIX, the fear gauge, dropped 4.53 percent to 13.47 from 14.11 levels, while the broader markets closed flat.

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