Technical View: Nifty forms Spinning Top pattern, 11,641 crucial for bulls
The Nifty50 after a roller coaster ride closed marginally higher and snapped the four-day losing streak on June 18, driven by select banks & technology stocks. Positive global cues amid stimulus by ECB and the forthcoming Federal Reserve meeting also aided sentiment.
The index formed small bullish candle which resembles a ‘Spinning Top’ kind of formation on daily charts.
Spinning Top is often regarded as a neutral pattern which suggests indecisiveness on the part of both bulls and bears. It can be formed in an uptrend as well as in a downtrend.
India VIX fell by 0.85 percent to 14.52 levels.
The consolidation is expected to continue but if the index extended gains then it can lead to the test of 11,800 on the upside, experts said.
The Nifty50 after opening flat at 11,677.05 remained rangebound throughout the session. It touched an intraday high of 11,727.20 and low of 11,641.15, before closing 19.30 points higher at 11,691.50.
“Nifty50 registered a ‘Spinning Top’ kind of indecisive formation, as it bounced back and managed to sustain above its 50-day exponential moving average (11,657) before signing off the session. However, as the said index remained in a narrow range of 86 points, it will be too early to call for a pullback rally from the lows of 11,641,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said besides no technical parameter at this juncture has generated a buy signal on lower time frame charts, hence, if the index slips below 11,641 levels in next session then it can head to test its critical supports placed around 11,591 from where some stability on upside can be expected.
For time being, it looks prudent on the part of traders to remain neutral on the index and wait for consolidation as risk-reward ratios even on the short side doesn’t look attractive enough, he advised.
Mazhar Mohammad said, nevertheless, any bounce from current levels can lead to the test of 11,800 on the upside.
On the option front, maximum Put open interest (OI) is at 11,500 followed by 11,700 strike while maximum Call OI is at 12,000 followed by 12,500 strike.
Call writing is at 11,800 followed by 11,700 strike, while Put writing is at 11,600 then 11,700 strike.
Option data suggests a lower trading range in between 11,500 to 11,929 zones, experts said.
“Nifty index formed a small-bodied candle at its crucial support of 50 DEMA but making lower highs – lower lows from last five trading sessions. Now it has to negate the formation of lower highs by surpassing 11,727 levels to get some stability to bounce towards 11,761 then 11,820 while a failed attempt could continue its weakness towards 11,600 and 11,550 zones,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Bank Nifty traded in the range of 30,200 to 30,550 zones for the most part of the session but failed to test above 30,600 zones. The index closed 77.75 points higher at 30,351.
It formed a small-bodied candle on the daily scale and has been making lower highs – lower lows from last five trading sessions.
“Now till it holds below 30,600 zone, it may extend its weakness towards 30,000 then 29,600 levels while on the upside resistances are seen at 30,600 then 31,000 levels,” Chandan Taparia said.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.