Technical View: Nifty forms Doji pattern, create longs only after index closes above 11,300

The Nifty50 on September 30 moved in the previous session’s trading range and ended a volatile session 25 points higher on September 30. FMCG, HDFC Group, select IT and pharma stocks supported the market but selling in metals, telecom, select private banks and auto stocks capped gains.

The index formed a Doji pattern on the daily charts as closing was near its opening level but respected its 50-DEMA and higher lows on the daily scale, which indicate a bullish-to-range bound undertone. But the bulls and the bears are both fighting to commence the next leg of the rally after the recent pullback from lower levels.

A Doji candle indicates indecisiveness among the bulls and the bears and bounces being sold in the absence of a follow-up buying interest.
Experts feel a sharp upside is unlikely unless the index decisively crosses the crucial 11,300-mark in the coming sessions.

Traders should create long positions only on a close above 11,300 but shorting should be considered below 11,180 in the session for a target of 11,090, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

After opening higher at 11,244.45, the index remained rangebound. It hit an intraday high of 11,295.40 and a low of 11,184.55 before closing at 11,247.50.
“On the upside, 11,300 is proving to be a critical hurdle as it also coincides with 50-day simple moving average value of 11,306," Mohammad said.

A close 11,300 shall be considered as a sign of strength for the bulls which can expand the pull-back swing initially towards 11,413, he said.
A close below 11,180 can resume the downswing with initial targets in the 11,099 – 11,072 zone but targets on the downside can be much higher, Mohammad said.

India VIX fell by 1.21 percent from 19.77 to 19.53 levels.

On the options front, the maximum Put open interest was at 10,500 followed by 11,000 strike, while themaximum Call open interest was at 11,500 followed by 12,000 strike. Marginal Call writing was seen in 11,300 and 11,700 strike while Put writing was seen at 10,500 then 11,000 strike.

The options data suggests that the Nifty could trade in a wider range of 10,800 to 11,500 while the immediate range could be 11,000-11,400.

The Bank Nifty failed to hold 21,500 and drifted towards 21,100 in the first hour. It negated the formation of higher lows of the last three sessions but buying interest in HDFC Bank brought it back to 21,500.

The index gained 40.50 points to close at 21,451.80 and formed a small-bodied bullish candle with a long lower shadow, which indicates that declines were being bought with the major support at 21,000, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.

"Now it has to hold above 21,500 to witness an upmove towards 21,750 then 22,000 and 22,222 while on the downside, key support exists at 21,200 then 21,000," he said.

Positive setup was seen in Grasim, Tech Mahindra, Titan, Apollo Hospitals, Dabur, Dr Reddy's Labs, Ramco Cements, Britannia Industries and HDFC Bank while weakness was seen in BPCL, SAIL, Bharti Airtel, BHEL and Container Corporation, he added.