Tech View: Overbought Nifty forms an indecisive Doji, hints at a pause in momentum

NEW DELHI: Nifty50 on Monday formed a fresh high for the third session in a row. The 50-pack index ended up forming a ‘Doji’ candle on the daily chart, suggesting indecisiveness among market participants at record highs.

The fact that the index is also trading in the overbought territory has raised the possibility of a halt to the ongoing momentum, even as analysts see no clear sign of weakness for now.

For the day, the index closed at 17,377, up 54.20 points or 0.31 per cent. The 14-day relative strength index (RSI) stood at 83 level. A RSI level above 80 in a rising market suggests an overbought situation.

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“Some weakness can be expected on Tuesday if Nifty50 slips below the 17,345 level. Momentum oscillators continued to display negative divergences, while few other indicators have startes giving overbought readings, hinting at some pause going forward,” said Mazhar Mohammad of Chartviewindia.in

Mohammad, however, feels Nifty50 can target the 17,500-600 levels if it manages to sustain at the 17,345 level.

Monday’s was the sixth session when the index formed a higher high-low formation, shifting the supports higher.

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“Support levels for the index have shifted higher to 17,300-17,200 levels and any dip around the mentioned range will act as a fresh buying opportunity. If the index sustains in this range, it could extend the current bounce towards the strong hurdle at 17,500,” said Rohit Singre, Senior Technical Analyst at LKP Securities.

Gaurav Ratnaparkhi of Sharekhan said the sideways action has allowed the overbought momentum indicator on the hourly chart to cool off a bit.

“On the downside, the junction of the 20-hour moving average and lower end of a rising channel at 17,300 is a crucial near-term support. As long as the index trades above the 17,300 level, the short-term trajectory is expected to remain positive and the index can head towards 17,500 and 17,630 levels in the short term,” he said.

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