Tech View: Nifty50 forms 'Dragonfly Doji' pattern; exercise caution
NEW DELHI: Nifty50 on Wednesday recorded a green real body for the sixth session in a row. With a close almost equal to the opening level, the index formed narrow real body for the day that had a long lower wick and a small upper wick on the daily chart -- something very similar to ‘Dragonfly Doji’ candlestick pattern.
Experts noted that the index has been forming higher highs– higher lows on a daily basis and the support is shifting higher. That said, weakening momentum oscillators are equally demanding caution.
“A Dragonfly Doji-kind of formation suggests that the forces of demand and supply are balancing with each other and trend is nearing a potential turning point. Besides, one of our momentum oscillators already generated a sell signal apart from RSI levels, which continued to display negative divergence despite new highs. This warrants caution,” said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in.
The Nifty50 opened the session at record high of 9,264.40. The index eased to hit a low of 9,215.40, before bettering its all-time high of 9,273.90. The index eventually closed at a closing high of 9,265.15, up 27.30 or 0.30 per cent.
“The index can extend its upswing by marching towards 9,350 where a potential short-term top can be registered. We advise short-term traders, whose time horizon is typically few days, to ride with the rally with tight stop loss where as positional traders, who can wait for couple of weeks, can have a stop below 9,139 levels on a closing basis,” Mohammad said.
Chandan Taparia, derivative & technical analyst at Motilal Oswal Securities said that the index needs to hold above 9,250 to extend its upmove towards 9,350 and 9,380. Taparia sees multiple supports at 9,218 and 9,191 levels.
Experts noted that the index has been forming higher highs– higher lows on a daily basis and the support is shifting higher. That said, weakening momentum oscillators are equally demanding caution.
“A Dragonfly Doji-kind of formation suggests that the forces of demand and supply are balancing with each other and trend is nearing a potential turning point. Besides, one of our momentum oscillators already generated a sell signal apart from RSI levels, which continued to display negative divergence despite new highs. This warrants caution,” said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in.
The Nifty50 opened the session at record high of 9,264.40. The index eased to hit a low of 9,215.40, before bettering its all-time high of 9,273.90. The index eventually closed at a closing high of 9,265.15, up 27.30 or 0.30 per cent.
“The index can extend its upswing by marching towards 9,350 where a potential short-term top can be registered. We advise short-term traders, whose time horizon is typically few days, to ride with the rally with tight stop loss where as positional traders, who can wait for couple of weeks, can have a stop below 9,139 levels on a closing basis,” Mohammad said.
Chandan Taparia, derivative & technical analyst at Motilal Oswal Securities said that the index needs to hold above 9,250 to extend its upmove towards 9,350 and 9,380. Taparia sees multiple supports at 9,218 and 9,191 levels.
