Thursday, October 31, 2019

Nifty forms Doji pattern on F&O expiry day

Nifty forms Doji pattern on F&O expiry day

Experts has advised traders to book profits in long positions either on a rally beyond 11,950 or if the index it trades below 11,855 levels.

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The Nifty wiped half of its gains in the last hour of trade and closed off the day's high on October 31, the expiry session for futures & options contracts, but continued upward momentum for the fifth consecutive session.

Good quarterly earnings and hope of more measures from government lifted sentiment, which saw the BSE Sensex find a new high of 40,392.22 intraday.

The Nifty formed a bearish candle that resembles a Doji pattern on the daily charts, as the closing was lower than the opening value.

The formation of a Doji candle indicates indecisiveness among the bulls as well as the bears.

Experts say 11,855 can be a crucial level to watch for on November 1. If the index falls below it then there could be selling pressure.

The Nifty50 opened higher at 11,890.45 and extended gains to hit an intraday high of 11,945, but trimmed the gains amid selling in last hour of trade. The index closed 33.40 points higher at 11,877.50.

India VIX fell by 2.28 percent to 16.28 levels. Options data suggests that the Nifty could trade in a broader range of 11,600-12,100 in the coming days.

Since it is the beginning of the new series, the Options data was scattered at various strike prices. Maximum Put open interest was at 11,600 followed by 11,500 strike, while maximum Call open interest was at 11,800 followed by 12,000 strike. Put writing was seen at 11,300 and 11,700 strike, while Call writing was seen at 12,100 followed by 12,000 strike.

The Nifty50 was showing signs of exhaustion, as it registered a Doji-kind of indecisive formation on expiry session,

“Though there are no apparent sell signals on the lower time-frame charts, indecisive formations of last two sessions in a row in which the Nifty registered negative closes on intraday basis, which is accompanied with over bought readings of momentum oscillators on lower time -frame charts warranting a pause in the ongoing momentum

In the session, if the index were to trade below 11,855 levels for 30 minutes, it could attract intraday selling, whereas weakness will get confirmed on a close below 11,784, which would accentuate selling pressure in the short-term

Any rally beyond 11,950 levels, without a correction, would be short lived,

Mohammad advised traders to book profits in long positions either on a rally beyond 11,950 or if it trades below 11,855 levels.

The Bank Nifty continued its positive momentum for the fifth consecutive session and extended its gains towards 30,400 levels. However, it failed to hold its gains at higher levels and drifted towards 30,000 in the latter part of the session.

The index closed 0.15 percent higher at 30,031.40 and formed a bearish candle on the daily scale as it closed below its opening levels but managed to hold near 30,000.

"It has to hold 29,750 to witness an upmove towards 30,500 then 30,800 while on the downside support is seen at 29,500 levels,"