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Technical View: Nifty forms Spinning Top pattern on weekly charts, 10,553 key for sharp upside

June 26
17:28 2020

The Nifty50 witnessed consolidation for the second consecutive session on June 26, especially after crossing the 10,500 level, though it closed nearly a percent higher following positive global cues and a good show by IT and select banking & financial stocks.

The index rallied but closed near to its opening levels to form the indecisive Doji pattern on daily charts. For the week, it gained 1.4 percent and formed a small-bodied green candle that resembled a Spinning Top pattern.

Spinning top is often regarded as a neutral pattern that suggests indecisiveness in the market. It can be formed in an uptrend as well as a downtrend.

For the time, traders should remain neutral and wait for a breakout in either of the directions, said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in.

India VIX fell by 3.35 percent to 28.73 levels. “Falling volatility suggests overall bullish stance and emergence of multiple supports at small declines,” Chandan Taparia of Motilal Oswal said.

The Nifty50 opened sharply higher at 10,378.90 and turned volatile with a positive bias. It touched an intraday high of 10,409.85 and a low of 10,311.25 before signing off the session at 10,383, up 94.10 points or 0.91 percent.

“The bulls appear to be clueless as they registered indecisive formations on daily and charts. Moreover, behaviour of last two trading sessions hints that the Nifty50 may be chalking out a new trading range in the 10,553–10,194 zone,” Mohammad said.

As long as the Nifty confines itself to the said consolidation zone, it should remain choppy without a proper direction unless it emerges out of this trading range, he said

A breakout above 10,553 will open up a new target towards 10,900 but a breakdown below 10,194 will provide a shorting opportunity with initial targets close to 10,000 levels, he said.

The options data indicated that the Nifty could trade in the 9,800 to 10,800 range.

Maximum Put open interest was seen at 9,000 followed by 10,000 strike, while maximum Call open interest was at 11,500 followed by 10,500 strike. Marginal Call writing was seen in 11,200 and 10,800 strike while Put writing was seen at 10,000 then 9,500 strike.

The Bank Nifty continued its positive stance for the second consecutive session as the intraday decline was bought including the last hour of buying interest.

The index closed with gains of 85.85 points at 21,592 and formed a small-bodied red candle on the daily charts. It formed a Doji pattern on the weekly scale after gaining 1.2 percent during the week.

“It formed a small body candle with long lower shadow on daily scale, which supports buy on decline strategy, but Doji formation indicates absence of follow-up action and stiff hurdle at 22,000-22,500 levels. Now, immediate support exists at 21,300 then 21,000 for an upside move towards 22,000 then 22,500 levels,” Chandan Taparia, Vice President | Analyst-Derivatives, Motilal Oswal Financial Services, said.

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