Tech view: Nifty shows Doji pattern; here's what it signifies

NEW DELHI: The domestic market ended flat on Tuesday with the Nifty50 losing just 0.05 points to close at 7,485. It failed to continue its positive momentum in the absence of follow-up buying and made a ' Doji' candle on the daily chart.

A ‘Doji’ candlestick pattern signifies indecisiveness between the bulls and the bears and signals a possible reversal.

To put differently, it means that the current trend might be losing strength and investors should look to pocket some of the gains. This chart pattern is usually formed either at the top of a trend or at the bottom.

"The Nifty50 corrected towards the previous day's low of 7,442 level, but it witnessed a recovery of around 50 points from lower levels in the last hour of trade and failed to cross above the 7,500 mark and closed with marginal loss by making a Doji candle on daily chart," said Chandan Taparia, Derivatives & Technical Analyst - Equity Research at Anand Rathi Financial Services.

"It has seen a pause in momentum but buying interest is being witnessed on the downside making it struggle near the 7,480 zone in last three sessions," he pointed out.

The index has to cross and hold above the 7,500-7,520 zone to continue its positive move towards the 7,575 -7,600 zone, he said.

The sideways movement does not come as a surprise given the fact that the movement of the index is more or less on expected lines.

The domestic market rose over 6 per cent in the week went by, partly because of favourable global cues and neutral budget. However, if the index fails to move higher and sustain below the 7,440 zone, then the immediate upward move may take a halt and the index may drift towards the next support at 7,380 and 7,365 levels, experts said.



"On Tuesday's trading session a 'Doji', dominated by sellers, was followed by a 'Hanging Man' on daily Japanese candlestick charts, thereby suggesting an upper hand for the bears in near term," said Mazhar Mohammad, Chief Strategist-Technical Research & Trading Advisory atwww.chartviewindia.in.

"A Doji pattern suggests indecisiveness of traders as they chose to close their positions at the end of the day where they open. Interestingly, this indecisive pattern is accompanied by a sell signal on the momentum oscillators on the lower time frame charts,” he said.

Prices are facing some resistance at their 89-day exponential moving averages, which successfully offered resistance in the past. All these factors are strengthening the bear case for the next couple of sessions, experts said.

Intraday weakness will be confirmed if Nifty consistently trades below 7,440. In such a scenario, the immediate target can be expected in the 7,406 - 7,380 zone.

Mohammad said the strength in the market can be expected only when Nifty50 closes above its 89 EMA, whose value is placed around 7,553 for the day.