Wednesday, August 6, 2008

Nifty Makes A Doji Candle: Time to Book Profits?

It was one of those days today when the Nifty opened with a positive bias due to better global cues and remained high for a better part of the day, only to enter a phase of profit booking and lose all its gains in a little more than an hour's time.

In the process, it seems that the Nifty has made a doji candle. A doji candle is one on which the open and the close price is the same or exactly the same. Which means that a doji candle may have a long (or short) shadows but a virtually non-existant body. An abnormal shutdown during the course of updation of today's prices in my charting software has produced some error on it. Because of this error, I have not been able to attach a chart today. But with the doji coming in after a big move up may signify that the bulls are tiring out and we may see some profit booking now, which in turn would make the outlook for Nifty negative for a couple of days at least.

Seeing
yesterday's chart, we can see that the support was near 4500 as provided by the neckline. Below this, support comes in near the downward sloping trendline which is now near 4400. A move below 4400 could bring it back to 4200 while above today's high of near 4600, it would turn bullish. The head and shoulders pattern cancels below 4150.

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Happy Investing!!!