Doji pattern close for August futures

The Nifty August futures closed in a Doji pattern on profit booking at the higher level, after earnings of some of the biggest companies such as Tata Motors and Tata Power fell short of estimates.

A Doji forms when the opening price (5,130) is the same or very near the closing price (5,128). The Doji formation today was with a long upper shadow, which indicates the buyers were able to push the price up during the session, but were unable to hold the market at the higher levels, conceding ground to the sellers. This formation usually indicates the uptrend is running out of steam.

Nevertheless, the August futures faced strong resistance above 5,170, as indicted in this column yesterday, and closed around the day’s low on account of selling pressure below 5,150. The initial balance (IB) range (5,122-5,170) covered 80 per cent volume and TPOs indicating involvement of the day trader more than other time frame traders. The trade summary matrix (TSM) or a consolidation of all the trades done for the day suggest buying in the range of 5,122-5,145 and significant selling pressure in the range of 5,145-5,170. The profit booking was evident above 5,170, and hence the need to close above 5,170 for the uptrend.

The market picture chart is hinting at price-based resistance for the August futures above 5,197 and volume based selloff can take the futures around 5,097. However, the pullback in the past two trading sessions is expected to take the index around 5,315, the MKTP chart suggests. The August futures settled at a per with spot and added 53,850 shares in open interest, despite a trade volume of 21.20 million shares, indicating change of hands among participants. Traders bought shares in the morning session to take advantage of weak opening but turned sellers post noon, after witnessing poor volume above 5,170.

The futures closed around the lower band of the IB range for two consecutive days, indicating higher level selling pressure from other time-frame traders. The options traders booked profit in 5,200-strike call options and initiated fresh short in the 5,100-strike call, as the current pullbacks seem to be running out of steam. However, short build was seen in the 5,000-5,100 strike/put options, indicating very little downside from the current level.