Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
The upside momentum continued in the market on Thursday amidst high volatility and Nifty closed the day with modest gains of around 45 points. After opening with a positive note, Nifty made an attempt to move up in the early part of the session. It later shifted into a high volatility for the better part and witnessed upside recovery from the lows towards later part of the session.
A small candle was formed on the daily chart with identical open and close and with upper and long lower shadow. Technically this pattern indicate a formation of 'dragonfly doji' type candle pattern at the highs. Normally, a formation of such candle pattern after a reasonable upmove or near the hurdle could signal confusion state of mind among participants. This action more often results in a trend reversal on the down side. Hence, trading long positions needs to be careful at the highs.
The positive sequence of higher highs and higher lows continued on the daily chart and Thursday's doji formation at the swing highs of 18272 could be considered as a new higher high of the sequence. Confirmation by the way of weakness in the subsequent session could open short term downward correction in the market.
Conclusion: The short term trend of Nifty continues to be positive. Emergence of high volatility and a formation of doji at the hurdle could be pointing towards the possible consolidation or minor weakness in the next few sessions. Any downward correction from the highs could find support at uptrend line around 18000 levels. However, a decisive move above 18272 is likely to negate the bearish setup for the near term.