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Tech View: Nifty50 forms indecisive ‘Doji’, but market bias stays positive

Failing to take out the 12,000 level should result in a pause in momentum, say analysts.

Oct 31, 2019, 04.54 PM IST
NEW DELHI: Nifty50 climbed for the fifth straight session on Thursday. Like on Wednesday, the index failed to capitalise on the intraday gains as it ended up forming an indecisive ‘Doji’ on the daily chart. This pattern indicated that traders lacked direction.

The market bias remains positive, but analysts said they would want to see the index close above 12,000 level. Failing to take out this level should result in a pause in momentum, they said.

“Going long on declines has worked well for investors so far. We continue with our bullish stance and believe that Nifty is headed for new highs. The 11,600 level is the immediate downside support for the index while the 12,000-12,100 range could pose some resistance,” said Manav Chopra, Head of Research – Equity at Indiabulls Ventures.

For the day, Nifty closed at 11,881, up 37.10 points or 0.31 per cent. The index has been moving above its short-term moving averages for some time, warranting a mean reversion, analysts said.

“A small negative candle was formed on Thursday, with the upper shadow at the swing high of 11,944. Technically, this pattern indicates the formation of High Wave-type candle. Such a formation after a reasonable up-move or near the key overhead resistance could be indicative of tiredness in the market. Hence, profit taking is likely at highs. That said, there is no indication of any important trend reversal pattern as yet,” said Nagaraj Shetti of HDFC Securities.

There are no apparent sell signals on the lower timeframe charts.

“If the index trades below 11,855 level for the first 30 minutes of Friday, it can attract intraday selling whereas weakness will get confirmed on a close below 11,784. Any rally beyond 11,950 level, without a correction, shall be shortlived,” Mazhar Mohammad of said.

Rohit Singre, Senior Technical Analyst at LKP Securities sees support for the index in the 11,840-11,780 zone and resistance in the 11,950-12,000 zone.

The chart structure still looks promising for the bulls, which signals that any dip can be bought into keeping a stop out level below 11,700.

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