The only positive takeaways from Friday’s session is that bulls managed to defend its crucial support level of 9,400.
Bulls failed to hold on to 9,500 level as Nifty gave up all its gains and closed below its opening level on Friday, making a bearish candle which resembles "spinning top" kind of pattern on the daily candlestick charts.
A Spinning Top is formed on the charts when the real body on the candle is small despite a wide range of price movement throughout the trading day. This candle is often regarded as a neutral pattern which suggests indecisiveness on the part of both bulls as well as bears.
The Nifty index which opened with a gap on the higher side witnessed a decline of around 100 points from its intraday high of 9,505.75 before closing at 9,427.90, down 1.5 points. It opened at 9,469.90.
The only positive takeaways from Friday’s session is that bulls managed to defend its crucial support level of 9,400, but for the momentum to continue, Nifty should take out its previous record high of 9,532 convincingly, suggest experts.
“Although Nifty registered a Spinning Top kind of indecisive formation, price behaviour for the session appears to be positively biased by the end of the day as bulls managed to defend the psychologically important 9,400 levels on closing basis,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“From current levels, traders can expect a bounce towards 9,500 in the fourth trading sessions; however, bigger moves should not be expected till Nifty closes above 9532 levels as on weekly charts Nifty registered Doji formation suggesting it has not made any progress throughout the week,” he said.
Till such breakout happens, threat of trend reversal shall continue to remain. “Traders are advised to give priority in trimming their long side positions by riding such pull back rallies with a stop below 9,370 levels,” said Mohammad.
The Nifty broke below three crucial support below before bouncing back from its 13-days exponential moving average. The Nifty slipped below 5-days exponential moving average (DEMA) placed at 9,446, 10-DEMA 9,420, and finally, 13-DEMA placed at 9,402.
The supertrend indicator still suggests a positive bias but MACD on Nifty is on the verge of giving a bearish crossover.
On the options front, maximum Put OI was seen at strike price 9,300 followed by 9,400 while maximum Call OI was seen at strike prices 9,500 followed by 9,600.
Fresh Call writing was seen at strike prices 9,400-9,700 which is restricting its upside momentum while Put writing was seen at all the strikes from 9,300 to 9,450 are supporting the market on declines.
“The Nifty recovered from lower levels and finally closed flattish but formed a Bearish candle followed by a 'Shooting Star' and a reversal 'Hanging Man pattern' on the daily chart,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.“Occurrences of multiple reversal candles at the top of the trend are giving a word of caution on an immediate basis. If it sustains below 9,450 zones, then weakness could drag the index towards 9,380 and 9,350 while on the upside hurdles are seen at 9,480-9,500 zones,” he said.