Tech view: 'Doji' pattern in Nifty daily charts now, should you be worried?

NEW DELHI: After making a ‘Doji’ pattern on the weekly charts, the equity benchmark on Monday made the same pattern on the daily charts - hinting at indecisiveness among the bulls as well as the bears.

The indecisiveness or a rangebound movement in the index could be because of the forthcoming meeting of the US Federal Reserve over Tuesday and Wednesday. Till then, market participants would prefer to remain on the sidelines. A 'Doji' pattern looks like a cross or a plus sign.

If the index makes a similar pattern post-US Fed outcome, then there is a possibility that the index would reverse some of the gains it has made post-Budget 2016.

The Nifty50 rose 73 points in intraday trade on Monday but it gave up most of its gains towards the end of the session and closed just 28 points higher at 7,538.75, which shows that neither the bulls nor the bears were able to dominate the market.

“In Monday's session, a ‘Doji’ was formed on the daily Japanese candlestick charts thereby suggesting that the market is indecisive and is consolidating. A Doji is said to occur when Nifty50 opening and closing prices are almost same,” said Vivek Gupta, CMT - Director Research, CapitalVia Global Research.

"It suggests that the bulls and the bears are at even, or at equilibrium. A Doji has been formed at the important resistance level of 7,600, it will be confirmed only if Nifty50 closes below Monday’s closing level of 7538.75 on Tuesday,” he said. All these factors are supporting the 'bear' case for the next couple of sessions, Gupta said.

Further weakness will be confirmed if Nifty50 consistently trades below 7,400 and closes below it. In such a scenario, the next immediate target for the index will be around the 7,350-7,300 levels.



Nikhil Kamath, Co-Founder & Director, Zerodha, said Monday’s price action in the market resulted in the Nifty50 forming a 'Doji' pattern on the daily candlestick charts.

A 'Doji' pattern in itself does not convey anything. It needs to be read with preceding patterns. The Nifty50 made strong gains in the first week of March and since then the momentum has slowed down. When a Doji is formed, it shows that the current trend could be showing signs of weakness.

“Given this and the fact that we have sufficient time for expiry, we would advise traders to sell out-of-the money Put options and holding the position till expiry,” Kamath said.