Tech view: Nifty50 forms a 'Doji', more volatility ahead?

NEW DELHI: The Nifty5o saw wild swings in the last trading session of the week, which signalled indecisiveness among the bulls and the bears. The index formed a ‘Doji Cross’ kind of pattern on the daily candlestick charts.

A ‘Doji’ is formed when the index opens and closes around the same level but remains volatile throughout the day, leaving a long shadow on either side. It appears like a cross or a plus sign.

The Nifty50 opened at 8,176 and closed virtually at the same level at 8,170, thus forming a Doji pattern. It rose to an intraday high of 8,195, making an upper shadow, and then fell to an intraday low of 8,135, forming a long lower shadow.

A ‘Doji’ is a neutral chart pattern and, hence, it should not be studied in isolation. Traders should take a call depending on how the index behaves over the next few sessions. A ‘Doji’ ahead of a key event like next week’s Brexit points to volatility in the coming week.

“In an extremely range-bound market, Nifty50 formed a ‘Doji Cross’ on the Japanese candlestick charts, as the market signed off the week with a small bull candle on the weekly charts, suggesting that the market might have bottomed out at its recent low of 8,063,” Mazhar Mohammad, Chief Strategist - Technical Research & Trading Advisory, Chartviewindia.in, told ETMarkets.com.

“However, the market may remain volatile all through next week as we move closer to the ‘Brexit’ Vote. Technically, a close above the 8,213 level shall suggest short-term strength whereas a breach of the critical support placed at 8,063 can trigger a fresh downswing,” he said.



As an event-driven week is approaching, experts advised short-term traders to observe extreme caution and remain in cash till the event risk gets over.

The Nifty50 closed unchanged for the week ended June 17, while the S&P BSE Sensex closed 0.4 per cent lower as some experts though the implication of the Brexit vote has not been fully factored in by the market.

“The implication of a Brexit has been underplayed until now and we believe the implications will be a lot larger than what has been factored in currently. DII and FII outflows mirror this concern,” Nikhil Kamath, Co-Founder & Director, Zerodha, told ETMarkets.com.

“Combined with the inherent hubris with most market participants calling for higher levels, there is a chance that the market will see some intermediate correction,” he added.

Kamath said these factors lead one to hold a short-term bearish view on the market, which could take the indices below the 8,000 level in the near term.