For the past four weeks (3rd week of June to 2nd week of July), Nifty 50 
NIFTY has shown extreme range-bound volatility. The volatility imprinted each week has built a culture of forming "Doji (s)" or indecision candles. In one instance, there is also evidence of a green spinning top. Even the green spinning top is considered an indecision candle. Thus, for the past four weeks, traders have been through a roller-coaster ride.
The article aims to understand the present culture of how the Nifty 50 Index is being traded. Specifically, it highlights the way doji candles are omnipresent in the existing market conditions. Lastly, it is evident that positional trading is not viable in the present market conditions, but opting for pure intraday trading is less risky.
What is Doji?
Doji is a Japanese term that means ‘Indecisiveness’ or ‘the same thing.’ The single candlestick pattern ‘Doji’ is defined as the price behavior for a particular session where the closing price has been the same as or near the opening price. Additionally, Doji shows evidence of large wicks (or candle shadows). It means that the price has shown large fluctuations during the trading session, but ultimately it closed near or at the same zone as the opening price. In the case of Doji, there is hardly any evidence of the body. Also, the presence of longer shadows confuses traders. Thus, the pattern is infamously identified as an indecisive session.
Formation of Long-Legged Doji
It is observed that Nifty 50 has consistently formed long-legged doji for the consecutive four weeks (except one green spinning top, which can also be considered as an indecisive session). Long-Legged Doji is also considered the perfect indecisive candlestick pattern. The open and close prices are equal. Also, the body stays perfectly in the middle of the upper and lower shadows. In a Gravestone Doji, though the session is indecisive, sellers still dominate. In the case of a Long-Legged Doji, both bulls and bears fail.
Impact of Consecutive Doji formation on Nifty 50 Trading
In the weekly sessions, holding on to directional trading has been extremely difficult. From a trader's perspective, any traders who have held their directional position speculating the continuation of the trend (either bullish or bearish) have been brutally punished by the market. The moment traders have speculated a continuation of the trend is the moment the market has changed its direction. The extreme range-bound volatility has been beneficial only for the intraday trend traders and the non-directional traders.
Is Doji a continuation pattern or a trend reversal pattern?
It is observed that after the completion of the indecisive session, most of the traders lose capital or end up at break-even. Furthermore, it directs the traders to speculate on the next trading session. The biggest disadvantage of working in a Doji session is that it shows the possibility of both trend continuation and trend reversal. But nothing happens. In this case, technical analysis or speculation does not work. Here comes the significance of philosophy. Traders need to nurture the philosophy that the future is unknown. A Doji session even escalates the uncertainty of future prices. It is unfortunate but true that technical analysis fails here. A short philosophy for traders to mitigate future price speculation after a Doji session is as follows:
“Be comfortable not knowing”
What's Next in the Nifty 50 Price Action?
Even if the weekly sessions have been extremely volatile and range-bound, there is hope. For the past four weeks, it can be observed that the price is slowly forming a high-highs and lower-lows structure. At least, the closing of each week is above the closing of the previous week. Also, Nifty 50 has formed a strong support zone or neckline at (23900 - 23700). Price sustaining above the zone of (23900 - 23700) could be considered bullish. Also, we have to keep an eye on the closing of the upcoming weeks. If the closings are above the previous week's closing, then it could be a relief for the bulls.
Disclaimer:
(i) The post is purely based on technical and chart analysis. The author has not studied the fundamentals. Thus, any fundamental or macroeconomic event can disrupt chart analysis.
(ii) The author has no intention to promote buy or sell recommendations.
(iii) The post is only for educational purposes.
(iv) Novice traders should stick to the cash segment for swing trading instead of F&O. This post has no intention to promote F&O trading.
(vi) Please be mindful during trading and investment decisions. Be Responsible.
Happy Trading!
NIFTY has shown extreme range-bound volatility. The volatility imprinted each week has built a culture of forming "Doji (s)" or indecision candles. In one instance, there is also evidence of a green spinning top. Even the green spinning top is considered an indecision candle. Thus, for the past four weeks, traders have been through a roller-coaster ride. The article aims to understand the present culture of how the Nifty 50 Index is being traded. Specifically, it highlights the way doji candles are omnipresent in the existing market conditions. Lastly, it is evident that positional trading is not viable in the present market conditions, but opting for pure intraday trading is less risky.
What is Doji?
Doji is a Japanese term that means ‘Indecisiveness’ or ‘the same thing.’ The single candlestick pattern ‘Doji’ is defined as the price behavior for a particular session where the closing price has been the same as or near the opening price. Additionally, Doji shows evidence of large wicks (or candle shadows). It means that the price has shown large fluctuations during the trading session, but ultimately it closed near or at the same zone as the opening price. In the case of Doji, there is hardly any evidence of the body. Also, the presence of longer shadows confuses traders. Thus, the pattern is infamously identified as an indecisive session.
Formation of Long-Legged Doji
It is observed that Nifty 50 has consistently formed long-legged doji for the consecutive four weeks (except one green spinning top, which can also be considered as an indecisive session). Long-Legged Doji is also considered the perfect indecisive candlestick pattern. The open and close prices are equal. Also, the body stays perfectly in the middle of the upper and lower shadows. In a Gravestone Doji, though the session is indecisive, sellers still dominate. In the case of a Long-Legged Doji, both bulls and bears fail.
Impact of Consecutive Doji formation on Nifty 50 Trading
In the weekly sessions, holding on to directional trading has been extremely difficult. From a trader's perspective, any traders who have held their directional position speculating the continuation of the trend (either bullish or bearish) have been brutally punished by the market. The moment traders have speculated a continuation of the trend is the moment the market has changed its direction. The extreme range-bound volatility has been beneficial only for the intraday trend traders and the non-directional traders.
Is Doji a continuation pattern or a trend reversal pattern?
It is observed that after the completion of the indecisive session, most of the traders lose capital or end up at break-even. Furthermore, it directs the traders to speculate on the next trading session. The biggest disadvantage of working in a Doji session is that it shows the possibility of both trend continuation and trend reversal. But nothing happens. In this case, technical analysis or speculation does not work. Here comes the significance of philosophy. Traders need to nurture the philosophy that the future is unknown. A Doji session even escalates the uncertainty of future prices. It is unfortunate but true that technical analysis fails here. A short philosophy for traders to mitigate future price speculation after a Doji session is as follows:
“Be comfortable not knowing”
What's Next in the Nifty 50 Price Action?
Even if the weekly sessions have been extremely volatile and range-bound, there is hope. For the past four weeks, it can be observed that the price is slowly forming a high-highs and lower-lows structure. At least, the closing of each week is above the closing of the previous week. Also, Nifty 50 has formed a strong support zone or neckline at (23900 - 23700). Price sustaining above the zone of (23900 - 23700) could be considered bullish. Also, we have to keep an eye on the closing of the upcoming weeks. If the closings are above the previous week's closing, then it could be a relief for the bulls.
Disclaimer:
(i) The post is purely based on technical and chart analysis. The author has not studied the fundamentals. Thus, any fundamental or macroeconomic event can disrupt chart analysis.
(ii) The author has no intention to promote buy or sell recommendations.
(iii) The post is only for educational purposes.
(iv) Novice traders should stick to the cash segment for swing trading instead of F&O. This post has no intention to promote F&O trading.
(vi) Please be mindful during trading and investment decisions. Be Responsible.
Happy Trading!
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.