Stock Market

Remain cautious as market’s losing momentum; Nifty forms a ‘doji’ candle on charts

The tussle between bulls and bears continued on Friday as the Nifty closed just around its opening level making a ‘Doji’ kind of candlestick formation on the daily candlestick charts.

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

The Nifty which opened at 9,104 rose to an intraday high of 9,133.55, but profit booking gripped markets and took the index to an intraday low of 9,089.40.

The index bounced back from its 5-days exponential moving average (DEMA) placed at 9092 and finally closed 21.7 points higher from its previous close at 9,108.

The Nifty index opened higher but failed to continue its momentum which suggests that bulls might be losing their grip on the market. Traders are advised to stay long and maintain strict stop loss below 9,048.

As per theory, ‘Doji’ chart patterns are commonly seen in periods of consolidation and can help analysts identify potential price breakouts or even a breakdown. It is a neutral chart pattern, and often suggest indecision on the side of both buyers and sellers.

“On the daily charts, Nifty registered an indecisive formation called ‘Doji’ which again point out to the fact that traders were clueless after the 100 point upmove over the week end,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told moneycontrol.

“In the light of this kind of indecisive formation we recommend traders to remain cautiously optimistic and hold or create fresh long positions with a stop below 9,048 on a closing basis as a breach of this level shall threaten the recent low of 9,019 thereby resuming short-term downtrend,” he said.

On the options front, maximum Put OI was seen at strike price 8,800 followed by 9,000 while maximum Call OI was seen at strike price 9,200 followed by 9,100.

Fresh Put writing was seen at strike prices 9,100, 9,150, 9,050 and 9,200 which may continue to hold the support zones while intact Call writing at strike prices 9,150, 9,200 and 9,250 are restricting its upside momentum.

For the coming week, it will be important for the index to hold above 9,075-9,100 level to continue its journey towards 9,160-9218 levels. Recently, it took support at its 13 DEMA and formed a bottom near to 9,020 zone.

“The Nifty index opened positive but failed to continue its momentum and formed a Doji candle on the daily chart,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told moneycontrol.

“The index has to continue to hold above 9,075 to witness a buying interest towards 9,160 and then towards 9,218 while on the downside 9020-9000 zone is likely to act as a major support,” he said.