Technical View: Nifty defends 10-day EMA and forms Doji pattern, 22,500 crucial for further upside

The Nifty 50 remained volatile and closed the session on a flat note, March 12, while defending 10-day EMA (placed at 22,318). The formation of Doji candlestick pattern on the daily charts indicated indecisiveness among bulls and bears about future market trend, hence experts feel 22,500 is expected to be crucial for further upward journey in the index, with support at 22,200 (which to some extent coincides with 21-day EMA - exponential moving average).

The Nifty 50, after starting off Tuesday's trade flat at 22,334, hit an intraday high of 22,453 and low of 22,256. The index, after volatility, settled at 22,336, up 3.05 points and the formation of Doji means the closing was similar to opening levels.

"The formation of a Doji candle suggests indecisiveness at current levels, and a breakout on either side could lead to trending moves," said Kunal Shah, senior technical & derivative analyst at LKP Securities.

He feels the immediate resistance for Nifty is at 22,500, and a break above this on a closing basis would signal a resumption of the upward movement.
Conversely, the immediate support is positioned at 22,200-22,150, and sustaining above this level could witness some recovery in the index, he said.

Options data indicated that 22,500 is expected to remain key resistance area for the Nifty 50, with support at 22,300.

On the Call side, the maximum open interest was visible at 22,500 strike, followed by 23,000 and 22,800 strikes, with meaningful writing at 22,800 strike, then 22,900 & 22,400 strikes, while on the Put side, the 22,000 strike owned the maximum open interest, followed by 22,300 and 21,500 strikes, with writing at 22,000 strike, then 22,100 & 22,300 strikes.

Bank Nifty

The Bank Nifty was also volatile and traded in 900-point range during the day. It has tested the 20-day moving average (46,900) as well as 21-day EMA (46,940) and witnessed a decent pullback to close off day's low, down 45 points at 47,282.

The banking index has also formed Doji or High Wave kind of candlestick pattern on the daily charts, indicating the tug-of-war between bulls and bears.

"Crucial support for Bank Nifty is placed at 47,000 – 46,900 while resistance is placed in the zone 47,820 – 48,000," Jatin Gedia, technical research analyst at Sharekhan by BNP Paribas said.

The broader markets fell more than benchmark indices given the breadth in favour of bears. The Nifty Midcap 100 index dropped 1.4 percent and Smallcap 100 index declined 2 percent.

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