Nifty Analysis: Tech View: Long-legged Doji on Nifty’s weekly chart signals likely weakness ahead

Nifty50 maintained its upward momentum for the third consecutive session on Thursday amid the expiry of weekly option contracts. Before closing 148 points, or 1.09 per cent, higher at 13,749, the index shuttled between intraday high and low of 13,772 and 13,627.

In the process, the index formed a bullish candle on the daily chart and a long-legged Doji on the weekly chart. The latter indicated indecision about the future direction.

A long-legged Doji is a candlestick pattern that comprises long upper and lower shadows and has approximately the same opening and closing prices. The candlestick pattern signals indecision about the future direction of the underlying security.

“A sustained trade above 13,780 level may extend the gains to 13,950-14,100 levels. However, a failure to trade and sustain beyond 13,780 level could trigger profit booking and drag the index lower to 13,650-13,550 levels,” said Aditya Agarwala, Senior Technical Analyst, YES Securities.

Check out the candlestick formations in the latest trading sessions

Subash Gangadharan, Technical and Derivative Analyst, HDFC Securities, says while Nifty has rebounded smartly in last three sessions, the short-term trend remains downward. “This would reverse on any close above the recent high of 13,778. The immediate support to watch for any resumption of weakness is at 13,626,” he said.

“The short-term trend remains downward. However, with the intermediate uptrend intact, we expect the recent correction to be more of a short-term nature and may have possibly bottomed out with strong price action seen in last three sessions. It is important that the recent low of 13,131 is not broken for the uptrend to sustain,” he said.

Nirali Shah, Senior Research Analyst at Samco Securities, said the immediate support for Nifty on the downside now stands at 13,130 level. Any breach below this level would lead to short-term weakness in the benchmark indices, while the immediate resistance on the higher side is now placed at 13,775.

Mazhar Mohammad, Chief strategist – technical research trading and advisory, Chartviewindia.in, believes the market may weaken from here. “Seeing robust recovery from the intra-week low of 13,131 level, a Doji on the weekly charts is hinting at impending weakness, as this kind of formations are usually seen as potential turning points,” he said.

“Hence, some sort consolidation or profit booking can’t be ruled out next session though short-term weakness in the market could be confirmed on any move below 13,626 level,” he said.