Technical View: Nifty forms Doji pattern, 11,900 crucial for upside

The Nifty50 remained strong throughout the session and recouped some of the previous week's losses on October 19, led by a rally in banking and financials and FMCG stocks. Positive Asian cues amid US stimulus and vaccine hopes also supported the market.

The index formed a Doji pattern on the daily charts as the closing was near the opening levels.

A Doji candle indicates indecisiveness among the bulls and the bears and bounces were being sold in the absence of follow-up buying interest.

Experts feel the 11,900 is expected to be a crucial level for further strong upside.

Traders should remain neutral by shifting focus to stock-specific opportunities, as there seems to be neither strength nor weakness in the index, Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

The Nifty50 opened strong at 11,879.20 and hit an intraday high of 11,898.25. It closed 110.50 points higher at 11,873.

"Albeit Nifty50 witnessed a gap-up opening, the bulls failed to capitalise on it as by the end of the day it registered a Doji kind of indecisive formation. Moreover, at today's intraday high of 11,898 levels it retraced around 62 percent of the recent fall from the highs of 12,025–11,661 levels," Mohammad said.

Hence unless the index gets past 11,900, further strength shall not be expected. On the downside, it will be critical for the Nifty to sustain above the day's bullish gap zone of 11,820–11,789, as a breach on a closing basis can drag the index towards 11,661, he said.

If the index stays above 11,900 in the next session, then the intraday strength can get extended towards 11,958, he said.

India VIX moved up by 0.82 percent from 21.64 to 21.81 levels.

On the options front, maximum Put open interest was seen at 10,500 followed by 11,000 strike, while maximum Call open interest was at 12,000 followed by 12,500 strike. Call writing was seen at 12,200 then 12,000 strike while Put writing was seen at 11,700 then 11,500 strike.

The options data indicated an immediate trading range of 11,700-12,000 for the Nifty.

The Bank Nifty opened gap up at 23,902.90 and witnessed sustain buying interest throughout the day to hit a day's high of 24,320.95.

The index outperformed the Nifty, rising 733.55 points or 3.12 percent to 24,266.80 and formed a bullish candle on the daily charts.

"It has given a decisive range breakout with a hold above 24,000-24,200 and is making higher lows from the last two trading sessions. Now it has to hold above 24,000 to witness an upmove towards 24,500 then 24,750-25,000 while on the downside, support is seen at 23,750 then 23,500 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Positive setup was seen in ICICI Bank, Axis Bank, SBI, Pidilite Industries, HDFC, Colgate-Palmolive, Container Corporation, Muthoot Finance, Kotak Mahindra Bank, InterGlobe Aviation, Cummins India and Havells while weakness was seen in Jubilant FoodWorks, Bajaj Auto, Sun TV Network, Bharti Airtel, M&M and Zee Entertainment.