Tech view: Nifty50 forms long-legged Doji pattern; shows bulls indecisive

NEW DELHI: The Nifty50 ended a volatile session almost flat on Friday, forming a 'long-legged Doji' pattern on the daily candlestick charts, which suggests indecisiveness among the bulls and the bears.

A typical long-legged Doji pattern is formed when the closing price is almost equal to the opening price, but in between there was a lot of movement on both sides. On Friday, the Nifty50 opened trading at 7,844.25 and closed at 7,849.80.

The chart pattern suggests neither the bulls nor the bears were able to gain control on the D-Street, thus signalling a shift in trend going forward. The chart pattern does suggest uncertainty, but traders should not go short on the index yet and wait for confirmation.

The Nifty50, which opened at 7,844.25, rose to an intraday high of 7,889.05, thus making a long upper shadow. It then fell to an intraday low of 7,788.70, making a lower shadow on the daily intraday charts.

There was buying in Nifty50 from its confluence of support levels available in the form of multiple moving averages, such as 13-day EMA and 200-day EMA.

“The Nifty50 recovered from the day's low of 7,788 and went on to close in the positive terrain slightly above where it had opened, resulting in the formation of a long-legged Doji," Mazhar Mohammad, Chief Strategist - Technical Research & Trading Advisory, Chartviewindia.in told ETMarkets.com.

"When we look into the wave structure, the correction since April 21 from the highs of 7,978 is unfolding in the form of a flat, which should ideally end below the 7,822 level,” he said.



The market managed to recover on increased volumes, which suggest a reversal of the prior-day bearishness and a continuation of the medium-term upward trend. But traders should wait for a confirmation before they add fresh longs.

Going forward, 7,677-7,750 levels would offer good support to the index in case it starts drifting southward. Those who are holding long positions should hold on to them, but should not go short right now.

One needs to be cautious while trading and if Nifty50 breaches its 200-day EMA on closing basis, which is placed at around 7,777, it could open a window for a further decline in the index. However, the long-term trend still looks intact.

"We continue to remain bullish on the market with a medium-term target of over 8,200 on the Nifty50. Look to shore up your portfolio on commodity stocks, as this cycle still looks upbeat,” Nikhil Kamath, Co-Founder & Director, Zerodha told ETMarkets.com.