Technical View | Nifty forms Spinning Top pattern, but RSI Stochastic show sentiments improving

India VIX, the fear index, fell 1.97 percent to 20.88 levels, giving comfort to bulls

India VIX, the fear index, fell 1.97 percent to 20.88 levels, giving comfort to bulls

The Nifty50 showed a smart recovery in the last couple of hours of trade and closed nearly a percent higher on June 23 following the positive trend in Asian counterparts.

The index witnessed a formation of the bullish candle which resembles the Spinning Top kind of pattern on the daily charts, indicating indecisiveness among bulls and bears, but as long as it holds 15,380-15,400 levels as support, the recovery could be possible initially towards 15,700-15,800 levels.

In the afternoon, the index strongly defended support levels on a closing basis, though there was volatility on the weekly expiry day.

The 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.

The rally was also seen in broader space as the Nifty Midcap 100 index gained 1.2 percent and Smallcap 100 index rose 1.3 percent on positive breadth. More than two shares advanced for every share falling on the NSE.

India VIX, the fear index, fell 1.97 percent to 20.88 levels, giving comfort to bulls. If the trend sustains and the volatility falls below the crucial 20 mark, then that could bring more stability to the market, experts said.

The Nifty50 opened moderately higher at 15,452 and climbed above 15,600 levels but lost all the gains in late morning deals and hit a day’s low of 15,367.50 in the afternoon session. However, there was a sharp recovery in the last couple of hours helping the index close 143 points higher at 15,557, supported by auto, banks, FMCG, IT, and pharma stocks.

“Albeit Nifty50 registered an indecisive formation called Spinning Top, the index appears to be finding some support around 15,380 levels, which is the lower end of the bullish gap zone registered on June 21. Hence, as long as this counter sustains above 15,382 on a closing basis, hopes of a pullback rally remain alive,” Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.

In such a scenario, initially, the Nifty may be expected to consolidate inside the range of 15,707 and 15,380, the market expert feels. And in case Nifty manages to get past 15,700, then the pullback swing shall expand into the critical resistance zone of 15,850 – 15,900 levels, the expert added.

Contrary to this, weakness shall be confirmed if it closes below 15,380 levels, he feels. For the time being, it looks prudent to remain neutral on the index till stable signs are visible, the expert advised.

The sentiments have gradually been improving especially after the market hit fresh 52-week low last week. Relative strength index (RSI) already moved from around 28 levels to 39.5 levels now on a week-on-week basis, while Stochastic gave a positive crossover on Thursday and overall has been trending upwards on a week-on-week basis.

“The daily RSI is in positive divergence. The trend is likely to remain positive in the near term with support at 15,400 and resistance at 15,600-15,800,” Rupak De, Senior Technical Analyst at LKP Securities said.

Options data suggested that the broader trading range for the Nifty50 could be between 15,000 to 16,000 levels.

On the option front, we have seen a maximum Call open interest at 16,000 strike followed by 16,500 strike while there was maximum Put open interest at 15,500 strike followed by 15,000 strike. Call writing was seen at 16,000 strike then 15,700 strike while Put writing was seen at 15,300 strike then 15,600 strike.

Bank Nifty also started off on a positive note at 32,927 and moved in a volatile manner with swift movement between 32,650 to 33,420 levels during the day. After a roller coaster ride, it settled at 33,135, up 290 points.

The banking index formed a bullish candle on the daily frame with longer shadows indicating swings throughout the day. Now, it has to hold above the 33,000 mark to show an up move towards 33,333 and 33,500 levels whereas supports are placed at 32,750 and 32,500 levels, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

On the stocks’ front, Taparia said there was a positive setup in Maruti Suzuki, Hero MotoCorp, Eicher Motors, Coforge, M&M, Ashok Leyland, Jubilant Foodworks, Indian Hotels, TVS Motor Company, Tata Motors, Asian Paints, Bajaj Auto, Pidilite Industries, TCS and Shriram Transport Finance; however, Manappuram Finance, Reliance Industries, Vedanta, Coal India, Bandhan Bank, and Marico witnessed weakness.

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