The Nifty which came within kissing distance of its previous record high of 10,137 came under selling pressure in the last 90 minutes of trade and closed below its crucial support level of 10,100 making a ‘Spinning Top’ kind of pattern on charts.
A Spinning Top candle is often regarded as a neutral pattern which suggests indecisiveness among both bulls as well as bears and can be formed in an uptrend as well as in a downtrend.
The Nifty opened at 10,099 and rose to an intraday high of 10,131.95. It slipped to an intraday low of 10,063.15 which made a small lower shadow. It closed 13 points lower at 10,079.30.
When a Spinning Top is formed in an uptrend, the one we are in right now, suggests that the buyers are losing conviction and a possible top could be in place, but will still require confirmation.
The previous record high becomes an important level which bulls need to surpass in the coming sessions if they want to remain in control of D-Street. Traders are advised to remain cautious and maintain a strict stop loss below 10,047.
“The Nifty registered a Spinning Top kind of indecisive formation around its critical resistance point of 10137 as it reversed the course of the day after almost retesting the previous high,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“As we have pointed out earlier post-Monday's trading session that the rally from the lows of 9685 is an upward corrective rally in nature but not a fresh leg of an uptrend and hence it shall reverse its course of action from any point of time here after,” he said.
Mohammad advises traders to remain cautious and maintain tight stops for the trading positions which should be created only above 10137 levels with a stop of 10047. If the index manages to take off 10137 levels then this pull back rally shall get extended up to 10205.
On the options front, maximum Put OI was seen at 9900 followed by 10000 strikes while maximum Call OI is at 10200 followed by 10100 strikes.
Fresh Put writing at strike 10100 while Call writing is being witnessed at 10100 to 10300 strikes. Intact Put writing at 10100 strikes is likely to hold the market while Call writing at 10200 strikes is restricting its upside momentum.
“It seems that tug of war between Call and Put writers would continue for next few hours to get a fresh leg of the rally. Technically, Nifty index formed a “Spinning Top” candle on the daily chart as it took a breather after the positive move of last four trading sessions,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“The trend of the market is intact to positive but if it sustains below 10050 then only a profit booking could be seen towards 10000-9980 zones while on the upside a decisive move above 10138 could commence the next leg of the rally towards 10200 then 10350 marks,” he said.
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