Technical View: Nifty forms a 'Doji' pattern; here's why 10,500 is crucial for bulls

The Nifty50 which started with a gap on the higher side reclaimed its crucial psychological resistance level of 10,550 on Thursday but closed around its opening level making a ‘Doji’ kind os pattern on the daily charts.

The pattern also closely resembles a ‘Harami Cross’ which is a two-candlestick pattern in which the first candle is a large candle which is followed by a ‘Doji’ candle. The pattern suggests that the previous trend may be about to reverse.

However, in Thursday’s session, we saw a formation of a Doji candle after a bearish candle but the trend is unlikely to shift unless 10,500 is broken on the downside convincingly, suggest experts.

The Nifty50 which opened at 10,563 rose to an intraday high of 10,572. It hit an intraday low of 10,546 before closing the day at 10,565, up 39 points.

As market breadth is picking up, traders are advised to shift their focus on stock specific opportunities. On the index, a break below 10,500 could fuel selling pressure while a break out above 10,630 shall extend the rally.

“The Nifty50 registered a Doji cross kind of formation on candlestick charts before signing off the day with an extreme range bound move of around 26 points. This pattern also resembles Harami Cross a two candlestick pattern which requires the first day to be a bullish candle body,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“But, in this case, the Wednesday’s candle is bearish one hence this potential bearish reversal formation can be ruled out and traders can take a sigh of relief as long as Nifty50 sustains above the Wednesday’s low of 10,509. In such a scenario a sideways move can be expected for next couple of trading sessions till a breakout in either of the directions is witnessed,” he said.