Tech View: Nifty forms a doji candle; A break below 23,500 is likely to push the index lower. How to trade on Monday

Technically, the Nifty 50 index formed a doji candle close to its 200-day exponential moving average (DEMA) support on the daily chart on Thursday, indicating uncertainty. The 200-DEMA is placed around 23,540.

23,500-23,540 range will act as an immediate support zone for the index. A strong break below 23,500 will push the index further down to 23,300-23,200 levels, where the trend line support is placed. Overall, the short-term trend is down, but as long as Nifty remains above 23,500, a pullback rally is possible, said Asit C. Hrishikesh Yedve of Mehta Investment Intermediates said.

In open interest (OI) data, the highest OI on the call side was seen at 23,600 and 23,700 strike prices, while on the put side, the highest OI was seen at 23,500 strike price followed by 23,550.

What should traders do? Here’s what analysts had to say:

Jatin Gedia, Sher Khan

On the daily chart we can observe that the index is trading around the 200-day moving average (23,556). The index is trading at crucial support levels. There could be a pullback as the hourly momentum indicator has triggered a positive crossover, however, the trend remains weak, and a pullback towards 23,700 – 23,750 should be used as a selling opportunity as the overall trend remains negative. On the downside, we expect 23,180 which coincides with the 61.82% Fibonacci retracement level.

Rupak De, LKP Securities

On Thursday, the Nifty closed near its 200-day EMA, forming a gravestone doji-like pattern on the daily chart, indicating bearish sentiment. This suggests a “sell on-wise” approach as the index moves into the oversold zone near the key EMA level. A bounce is likely, but should be viewed as a selling opportunity. Selling pressure may intensify if Nifty breaks below 200-day EMA. The index has support at 23,450, with resistance expected at 23,650, forming a short-term trading range.

Nagaraj Shetty, HDFC Securities

The Nifty has formed a long bearish candle on the weekly chart, which is close to the next important support of the intermediate ascending trend line around the 23,300 level. The underlying trend of Nifty has been consistently negative. Although there are some indications of an oversold nature, there is still no confirmation of a decisive reversal pattern forming at lower levels. A critical slide below 23,500 is expected to drag Nifty to 23,200-23,000 levels by next week. However, a sustained move above the 23,700-23,800 levels could open up the possibility of a major rally in the market.

(Disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. These do not represent the views of Economic Times)