Technical View: Nifty forms Doji pattern, 11,900 crucial level for upside

Nifty50 failed to hold on to 11,900 mark before closing due to profit booking and caution ahead of interest rate decision by RBI on October 9, though the index closed higher for sixth consecutive session on October 8 due to buying in technology, banks and pharma stocks.

The index formed Doji kind of pattern on the daily charts as closing was near opening levels. A Doji candle indicates there is some indecisiveness among the bulls and the bears and bounces were being sold in the absence of follow-up buying interest.

Experts feel Nifty50 needs to trade above 11,790 levels to sustain uptrend, while 11,900 is expected to remain crucial for strong upside towards 12,000 mark.

Considering the volatile nature of markets with mixed technical signals on charts, it looks prudent on the part of traders to remain neutral till weakness in the index is confirmed, Mazhar Mohammad of Chartviewindia.in advised.

India VIX moved up by 1.60 percent from 20.06 to 20.38 levels, which needs to cool off to support bulls.

The Nifty50 after opening higher at 11,835.40 extended gains to hit an intraday high of 11,905.70, but the profit booking at higher levels wiped out some gains in last couple of hours of trade and as a result the index had broken even 11,800 mark for a short period before showing some recovery. Finally it settled at 11,834.60, up 95.70 points.

"Despite a strong opening and intraday rally, bulls appear to have disappointed as Nifty50 given up all the intraday gains from the high of 11,905 levels before signing off the session around opening price which depicted a Doji kind of indecisive formation hinting that traders are clueless about further direction perhaps owing to which even advance decline ratio also remained negative for a second day in a row," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

Moreover, index appears to have stretched on the upside as it is trading way above its short term moving averages warranting a mean reversion as prices can't sustain at much higher levels from its mean for a longer period of time, he said.

Hence, he feels sooner than later Nifty will undergo a corrective downswing which can be kicked in if the index closes below 11,790 in next trading session.

In case, as upside momentum is very strong, if bulls manage to pull the indices beyond 11,905 levels then ideal target on upside shall be close to 12,000 levels, he feels.

Option data indicated an immediate trading range for the Nifty could be 11,600 to 12,000 levels, which increased from 11,500-11,900 earlier.

On option front, maximum Put open interest was at 10,500 followed by 11,000 strike, while maximum Call open interest was at 12,500 followed by 12,000 strike. Marginal Call writing was seen in 12,200 and 12,100 strike while Put writing was seen at 11,800 then 11,500 strike.

Bank Nifty started off session higher at 23,150.25 and hit an intraday high of 23,450.90 in the initial part of the session. However, it witnessed a profit booking dip of around 400 points from higher levels in last hour of the session but finally closed positive with the gains of around 1 percent at 23,191.30 and continued its winning streak for sixth consecutive session.

"It has been making higher high - higher lows for fifth consecutive session but formed a Spinning Top kind of candle on daily scale as it failed to hold higher levels. Now it has to continue to hold above 23,000 levels to witness an upmove towards 23,500 then 24,000 while on the downside key support exists at 22,750 then 22,500," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.