Tech View: Nifty forms Dragonfly Doji; analysts advise utmost caution

Tech View: Nifty forms Dragonfly Doji; analysts advise utmost caution

NEW DELHI: Nifty50 on Wednesday climbed for the sixth straight session. At one point, the 50-pack was just 3 points away from the 14,000 mark, but it settled a tad lower. The intraday selloff got bought into, as suggested by the indecisive candles on the daily charts in the past couple of sessions. On Wednesday, Nifty formed a Dragonfly Doji with a long lower wick, which suggested the same or similar open, high and closing prices for the index.

“Despite trading in a positive zone, the indecisive price actions were accompanied by narrow trading range in last three sessions and overbought readings on the momentum oscillators. That said, the technical indicators are yet to generate sell signals,” said Mazhar Mohammad of

He, however, warned that a similar situation with a narrow range and overbought levels had resulted in a sudden single day flash crash on December 21. So, he advised traders to exercise utmost caution with their long side bets.

For the day, Nifty closed at 13,981, up 49.35 points or 0.35 per cent.

The index has reached its immediate hurdle level at 14,000, said Rohit Singre, Senior Technical Analyst at LKP Securities.
“If it moves and holds above 14,000 level, only then can we expect the current bullish momentum to extend further. Otherwise, some profit booking is likely to ensue and the index may trade in the 13,800-14,000 range.”

Check out the candlestick formations in the latest trading sessions

Independent analyst Manish Shah said the type of the candle Nifty formed on Wednesday was the one with a bottoming tail. On Tuesday as well, the pattern was one a bottoming tail, he said.

“For those who want to play the F&O expiry, a break below 13,850 level can bring Nifty down to 13,750 level. If the index holds above 13,980 level, expect a bump towards 14,100-14,120 zone,” he said.

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