Moneycontrol
Sep 16, 2017 07:21 PM IST | Source: Moneycontrol.com

Technical View: Uncertainty continues! Nifty makes Spinning Top; place a stop below 10K

The index closed flat as traders preferred to stay on sidelines ahead of the weekend. The index made an indecisive pattern, ‘Spinning Top’ kind of pattern for the third consecutive day in a row.

ByKshitij Anand
Technical View: Uncertainty continues! Nifty makes Spinning Top; place a stop below 10K

Kshitij Anand

Moneycontrol News

The Nifty closed flat with a slight negative bias on Friday after North Korea test-fired another missile that flew over Japan’s northern Hokkaido far out into the Pacific Ocean.

The index closed flat as traders preferred to stay on sidelines ahead of the weekend. The index made an indecisive pattern, ‘Spinning Top’ kind of pattern for the third consecutive day in a row.

A Spinning Top candle is often regarded as a neutral pattern which suggests indecisiveness among both bulls as well as bears. When a Spinning Top is formed in an uptrend, the one we are in right now, suggests that the bulls are losing conviction and a possible top could be in place, but it will still require confirmation.

“The markets again rallied intraday to come in touching distance with all-time highs, the initial gap down was largely attributed to Geopolitical tensions around North Korea,” Nikhil Kamath, Co-founder & Head of Trading, Zerodha told Moneycontrol.

“News of Aircel bankruptcy around closing again drove the markets slightly lower. We continue to hold a short-term bearish and a long-term bullish strategy on the markets. We would advise refraining from taking big bets on the long side right now,” he added.

The index witnessed selling pressure soon after it climbed its crucial resistance level of 10,100. The good part is that it closed above its 5-days exponential moving average (DEMA) placed at 10,059.

It looks like bulls are awaiting fresh signals but uncertainty around the global front is not giving enough conviction to bulls to take charge of D-Street, suggest experts. A decisive move above its previous record high of 10,138 is required for the index to breakout.

The Nifty opened at 10,062.35 dipped slightly towards its intraday low of 10043.65. It rose to 10,115.15 before closing the day at 10,085.40, down 1.2 points.

“The Nifty continued its range bound move for the third trading day. Traders at this juncture need to be utmost cautious as this rally should perish going forward without adding much value addition to the previous top of 10137 even if it breaks out,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“We believe that it is in a topping formation and once the signs of reversal get confirmed the subsequent down leg shall drag down the indices towards 9,700 kinds of levels,” he said.

Mazhar advises traders to ride their long positions with a stop below 10,000 on a closing basis and make use of this rally if any to exit their long positions even on strength beyond 10137 levels.

On the options front, maximum Put OI was seen at strike prices 9,900 followed by 10,000 while maximum Call OI was seen at strike prices 10,200 followed by 10,100. Fresh Put writing was seen at strike prices 9,900 while Call writing was seen at 10,100 and 10,200.

“Intact Call and Put writing is keeping the range-bound market move as it got stuck near to its lifetime high zones while India VIX moved up by 1.81% at 11.67. It has been making Spinning Tops from last three consecutive sessions which indicates a tough fight between bulls and bears near to its life time high zones,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“Trend of the market is intact to positive but if it sustains below 10,050 then only a profit booking could be seen towards 10,000-9,980 zones while on the upside a decisive move above 10,138 could commence the next leg of the rally towards 10200 and higher levels,” he said.
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