The Nifty50 traded lower for the major part of the session on July 29 due to selling pressure in Reliance Industries, HDFC Group, auto and technology stocks. Traders also seem to be cautious ahead of the outcome of the two-day Federal Reserve's meeting.
The index fell almost 100 points and formed a bearish candle, which resembled a Spinning Top pattern on daily charts.
A 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.
As the trend is uncertain, it will prudent on the part of traders to remain neutral. Traders with a high-risk appetite who like to have long side exposure can do so with Call options by placing a market stoploss below 11,149 levels on a closing basis, said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in.
India VIX moved up by 2 percent to 24.11 levels.
The Nifty50 opened higher and hit an intraday high of 11,341.40 in the early trade but immediately slipped in the red and touched the day's low of 11,149.75 in late trade. The index closed at 11,202.90, down 97.60 points or 0.86 percent.
"The bulls disappointed as the Nifty50 almost wiped out all the gains witnessed in Tuesday's session with an intraday low of 11,149," Mohammad said.
Despite the Nifty emerging out of its trading range the previous day, it remained inside the 25-day old ascending channel where it has been struggling for the last six sessions, he said.
Unless the Nifty decisively closes above the said channel, whose resistance point for the next session is placed at 11,380 levels, a sustainable rally should not be expected, he added.
It was critical that the index sustains above 11,149, as a breach on a closing basis could trigger a fresh bout of selling pressure, Mohammad said.
Options data suggested that the Nifty could see an immediate trading range of 11,100-11,350.
On the options front, maximum Put open interest was seen at 11,000 followed by 10,000 strike, while maximum Call open interest was at 11,300 followed by 11,500 strike. Call writing was seen at 11,300 and 11,350 strike, while Put unwinding was seen at all the immediate strikes.
The Bank Nifty negated the formation of lower highs of the last four sessions but momentum was missing even after its turn from 50-DEMA.
The index closed near its opening levels, down 28.60 points at 22,076.60 and formed a Doji candle on the daily scale after moving in a the 21,900-22,350 range.
"It got stuck in the range as supply pressure was seen on bounce while key moving averages are providing support on declines. Now it has to hold above 22,000 levels to witness an upmove towards 22,500 then 22,750 levels, while on the downside, support is seen at 21,500 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
"Positive setup was seen in Dr Reddy's Labs, SRF, Colgate Palmolive, Tata Chemicals, Tata Consumer Products, Divis Labs, UPL, Tata Steel, Apollo Hospitals and Mindtree while weak structure was seen in Amara Raja Batteries, Motherson Sumi, Havells and MRF," he added.Disclosure: Reliance Industries Ltd is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.