Nifty, which started on a positive note on Monday, rose to an intraday high of 10,850, but fierce selling in the last hour of trade pushed it below 10,800.
The index closed near its intraday low, making a ‘Gravestone Doji’ kind of pattern on the daily chart.
A Gravestone Doji is formed when the open, low and the closing price are all at a similar level. The candle would have a long upper shadow, which would depict a fall from the intraday high, and no lower shadow.
The long upper shadow indicates the selling pressure that pushed the index towards its opening level. It is considered as a bearish reversal candlestick pattern.
Nifty, which opened at 10,781.85 rose to an intraday high of 10,850. Bulls took charge in the final hour of trade, pushing the index to an intraday low of 10,777.05. The index finally closed 19 points higher at 10,786.95.
Investors are advised to stay cautious as bears might try and regain control in the coming few sessions. It is crucial for the index to hold above 10,777 on Tuesday. Experts have placed the immediate resistance for the index at 10,850.
“The Nifty registered a bearish reversal formation called Gravestone Doji with a long upper shadow suggesting that bulls encountered selling pressure around its critical resistance point of 10,826 levels,” Mazhar Mohammad, Chief Strategist – Technical Research and Trading Advisory, Chartviewindia.in, told Moenycontrol.
“Hence, in the next trading sessions bears shall pick up momentum once they manage to push the prices below 10,777 levels and selling shall get accelerated further on a close below 10,709 levels marking a significant near-term top around 10,850 going forward,” he said.
Mohammad added that after the index recorded a top of 10,850, there were suspicions of a fresh leg of downward movement in which it could potentially fall to below 10,550.
However, he also said that a close above 10,850 could reinstate bullish momentum. Traders are advised to remain neutral and avoid long side bets for the time being.
India VIX rose 3.78 percent to 13.18. On the options front, the maximum put open interest was seen at the 10,600 strike price, followed by the 10,700 strike price.
The maximum call open interest was seen at the 11,000 strike price, followed by the 10,900 strike price.
Fresh put writing was seen the most at the 10,800 and 10,700 strike prices, while fresh call writing was seen the most at the 10,900 and 11,100 strike prices..