Technical View: Nifty forms Spinning Top candle; 14,600 level to be crucial support going forward

Image: Pixabay

Image: Pixabay

The Nifty50, except early dip, traded higher for major part of the session and snapped a five-day losing streak on February 23. Auto, metals, select banking & financials and index heavyweight Reliance Industries lent support to the market.

The benchmark index formed a bearish candle which resembles Spinning Top kind of pattern formation on the daily charts. 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 in a downtrend.

Experts feel if the index holds 14,600 levels in the coming sessions, which had also acted as a crucial support in previous falls, then there could be further upside.

As index seems to be directionless, Mazhar Mohammad of advised traders to remain neutral whereas shorting opportunity should be considered below 14,600 levels with a stop above intraday high.

The Nifty50 after opening higher at 14,782.25 turned volatile and hit an intraday low of 14,651.85, but immediately recovered and extended gains to hit a day’s high of 14,854.50 in the morning trade itself. It remained volatile throughout the session and settled at 14,707.80, up 32.10 points.

“Bulls seem to be drawing some comfort from 34 EMA, whose value is placed around 14,600 levels, which has offered support in the past on couple of occasions. Moreover, as bulls managed to defend last Monday’s low of 14,635 levels before signing off the session with a Spinning Top kind of indecisive formation, the index can be expected to consolidate inside the range of 14,600 to 15,000 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at told Moneycontrol.

For intraday traders, 14,854 can act as an initial hurdle and if bulls manage to push the index beyond the said level, then the strength may get expanded towards 15,000 levels, the expert said.

However, index shall remain vulnerable for a sell off if it breaches 14,600 levels on closing basis, Mazhar Mohammad feels. “In such a scenario it can be pulled down towards its 50-day EMA whose value is placed around 14,370 levels,” the analyst said.

India VIX fell by 0.95 percent from 25.47 to 25.22. Overall, higher VIX is keeping the roller coaster ride in the market and restricting its upside movement, Chandan Taparia of Motilal Oswal Financial Services (MOFSL) feels.

On options front, maximum Put open interest was at 14,000, followed by 14,500 strike while maximum Call open interest was at 15,000, followed by 14,800 strike. Put writing was seen at 14,700 and 14,600 strikes while Call writing was seen at 14,800 then 14,700 strike followed by unwinding in 15,500 strike. Options data suggested that the Nifty could see an immediate trading range of 14,500 to 15,000 levels.

Bank Nifty opened gap up at 35,540.55 but failed to sustain its opening hurdle of 35,700. Banking stocks witnessed selling pressure and as a result index breached 35,000 zone to hit a day’s low of 34,976.

The index closed the day with losses of 140.30 points at 35,116.90 and formed a bearish candle on daily scale. “Bank Nifty continues its formation of lower highs – lower lows of the last five sessions. Now, till it remains below 35,700, weakness may continue towards 34,500 and 34,250 levels while on the upside major hurdle shifts to 36,000,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

On stocks’ front, bullish setup was seen in Tata Steel, Tata Motors, SAIL, Hindalco, Cummins India, NALCO, UPL, GAIL, Siemens, BPCL, Tata Chemicals, Jubilant Foodworks, NMDC, Vedanta, Motherson Sumi, and JSW Steel while weakness was seen in Bank of Baroda, Kotak Mahindra Bank, Indraprastha Gas, Godrej Consumer Products, Mahanagar Gas, Maruti Suzuki, Cadila Healthcare, HCL Technologies and Glenmark Pharma, Taparia added.

Disclaimer: “Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Moneycontrol.”