Technical View: Nifty forms Spinning Top pattern on weekly scale, indicates consolidation ahead

It was a negative start for the October series. The Nifty 50, after opening moderately lower, traded in the range of previous day's candle throughout the session and closed half a percent lower on September 27.

The index managed to hold the 11,500 levels, forming a bearish candle on the daily charts while it rallied 2.1 percent for the week, seeing the Spinning Top kind of formation on the weekly scale.

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 the pattern formation and the behaviour of the market in the last few trading sessions after September 20-23 rally indicated that consolidation is likely in coming days before a fresh breakout.

India VIX fell by 1.38 percent to 16.11 levels.

The Nifty 50 opened lower at 11,556.35 and traded in a range of about 100 points throughout the session. The index hit an intraday high of 11,593.60 and low of 11,499.75, before closing 58.80 points lower at 11,512.40.

"Nifty50 registered a small bearish candle on daily charts whereas a Spinning Top kind of indecisive formation is witnessed on Weekly charts after a strong gap up opening for the week. This price action is suggesting that Nifty for time being is on consolidation mode and in need of a fresh breakout to pickup the upward momentum once again. Such a breakout shall occur once it manages a strong close above 11,695 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

He said on the downsides it looks critical for Nifty to sustain above the gap zone of 11,416–11,382 on the weekly charts. As long as this support is respected traders can retain positive stance which should eventually pave the way for a breakout above 11,695, he added.

Contrary to this a close below 11,382 shall accentuate selling pressure which should ideally drag down the indices towards its 200-day moving average (11,247), he said, adding as twin momentum oscillators are on sell mode he advised traders to refrain from creating fresh longs unless Nifty registers a breakout above 11,695 levels.

Options data suggests the Nifty could trade in a broader range of 11,300 to 12,000 levels in coming sessions.

Maximum Put open interest is at 11,000 followed by 11,500 strike while maximum Call open interest is at 11,500 followed by 11,200 strike.

Minor Put writing was seen at 11,500 followed by 11,600 strike while Call writing was seen at 11,700 followed by 12,000 strike.

Bank Nifty consolidated for the most part of the day as it traded in the range between 29,700 to 30,100 levels. The index closed 0.42 percent lower at 29,876.65 and formed a small-bodied candle on the daily scale while Long-legged Doji on a weekly scale.

"It is finding multiple supports near 29,500 levels while hurdles are intact at higher zones. Now it has to continue to hold above 29,750 to extend its gains towards 30,500 then 30,750 levels while on the downside support is seen at 29,400 then 29,250 levels," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.