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Technical View: Bulls Vs Bears! Nifty forms Doji candle on daily charts

The Nifty50 which opened at 10,488 rose to an intraday high of 10,535 which made a long upper shadow, but bears quickly took control and pushed the index below 10,500, which made a long lower shadow on the daily charts.

March 05, 2018 / 12:46 PM IST
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The Nifty50 which opened with a gap on the lower side managed to recoup losses and closed near its opening level forming a ‘Doji’ kind of candle on the daily candlestick charts on Wednesday.

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 shadows on either side. The body will be insignificant which will appear like a plus sign on the charts.

Formation of a Doji candle after a bearish candle signifies that bulls are not out of the game; however, a directional move on either side is required to confirm the trend.

For bulls to regain control of this market, Nifty should reclaim 10,600 levels to extend its upmove towards 10,700-10,800 levels while on the downside a breakdown below 10,300 could fuel selling pressure. Investors are advised to remain stock specific.

The Nifty50 which opened at 10,488 rose to an intraday high of 10,535 which made a long upper shadow, but bears quickly took control and pushed the index below 10,500, which made a long lower shadow on the daily charts.

The index hit an intraday low of 10,461 before recouping losses. It closed 61 points lower at 10,492. The index decisively closed below its 5-DEMA placed at 10,503 levels, and 13-DEMA placed around 10,517.

“The Nifty50 registered a Doji kind of indecisive formation after witnessing gap down opening by taking leads from negative global cues. However, at today’s low of 10461 it exactly retraced 50% of its rally from the lows of 10302 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“The fact that lack of incremental selling and intraday recovery to the opening point is suggesting some sort of selective buying to have taken place by making use of this dip. As Bank Nifty is looking more vulnerable there can be some more pressure even on Nifty50 and in such a scenario the correction can get extended up to 10300 kind of levels if Wednesday’s low 10461 is breached,” he said.

Mohammad further added that essentially it looks that index is still making a range bound move between 10630 to 10300 kind of zone. Unless it is breached in either of the directions market may not witness one side directional move.

India VIX moved down by 0.83% at 13.80. On the options front, maximum Put open interest is placed at 10400 followed by 10300 strikes while maximum Call open interest is at 10700 followed by 11000 strikes.

“We have seen fresh Call writing at 10900 followed by 10500 while fresh Put Writing is seen at 10300 followed by 10400 strikes. Option band signifies a trading range between 10400 to 10630 zones,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The Nifty fell down towards 10460 zones but recovered from lows and formed a Doji candle on the daily chart. Formation of Doji candle after the decline of the last session indicates that Bulls and Bear both are fighting hard to get their grip in the market,” he said.

Taparia further added that Nifty has to cross and hold above 10550 zones to witness a bounce back move towards its major hurdle of 10620 while a hold below 10500 could extend its decline towards next support of 10430 then 10400 levels.

Moneycontrol News
first published: Feb 28, 2018 04:14 pm

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