The Nifty50 rallied sharply to hit a fresh record high but erased gains amid profit booking in last hour of trade and snapped six-day winning streak on February 9. The weakness in European peers and consistent outflow in equity mutual funds weighed on sentiment.
The index formed bearish candle which resembles Spinning Top kind of pattern on the daily charts. 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 downtrend.
Experts feel the selling pressure can be extended if the index decisively breaks psychological 15,000-mark in coming sessions.
For the time being, trade is neutral on long side, said Mazhar Mohammad of Chartviewindia who advised that positional traders should consider shorting if Nifty closes below 15,000 levels for a initial target of 14,700.
The volatility remained on the higher side as India VIX moved up by 1.29 percent from 23.95 to 24.27 levels.
The Nifty50 opened strong at 15,164.15 and extended gains to hit an intraday record high of 15,257.10, but gradually wiped out all gains in last hour of trade to hit a day's low of 15,064.30. The index closed at 15,109.30, down 6.50 points.
"Finally some semblance of weakness is visible among bulls as Nifty50 has given up its gains from the intraday highs of 15,257 levels before signing off the session with a bearish candle which resembles an indecisive Spinning Top," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
In next trading session, if Nifty slips below 15,114 levels then it can attract more profit booking with initial targets placed in the bullish gap zone of 15,041 – 15,014 levels registered on February 8, he feels.
However, slightly bigger correction can be expected if Nifty closes below 15,000 levels, according to him. "In such a scenario downswing can extend initially towards 14,700 levels with eventual targets placed in the zone of 14,469 – 14,330 levels."
Meanwhile, he feels strength shall not be expected unless Nifty registers a close above 15,257 levels. "On such a close upswing may get expanded towards 15,500 levels," he said.
On option front, maximum Put open interest was at 14,000 followed by 13,500 strike while maximum Call open interest was at 15,500 followed by 16,000 strike. Put writing was seen at 14,600 and 14,800 strikes while Call writing was visible at 15,200 and 15,400 strikes.
The option data indicated that the Nifty could see a wider trading range of 14,500 to 15,500 levels in coming sessions.
Bank Nifty opened higher at 36,058.80 and drifted lower to hit an intraday low of 35,636.85 in the initial hour of the session. However it recovered sharply from lower zones and extended its momentum to touch an intraday high of 36,477.15. It formed a Doji candle on daily scale but negated the formation of higher bottom after seven sessions.
"The index has got in range between 35,500 to 36,600 from past few sessions however managed to close near 36,000 levels. The index has to hold above 36,000 to witness a move towards 36,500-36,600 while on the downside support is seen at 35,500 and 35,250 zones," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
On stocks front, bullish setup was seen in Tata Chemicals, Voltas, Asian Paints, Mahanagar Gas, Indraprastha Gas, TVS Motor Company, Axis Bank, Titan and L&T while weakness was seen in Balkrishna Industries, BHEL, L&T Finance Holdings, Zee Entertainment, Mcdowell, Cadila Healthcare, Coal India and ITC, he added.