Nifty50 opened higher following previous day's sharp rally, but erased those gains to turn volatile in late morning deals and finally closed flat on August 5 as traders seemed to be cautious ahead of interest rate decision by RBI monetary policy on August 6.
The index closed above 11,100 and formed small bearish candle, which resembles a Spinning Top kind of formation on 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 a downtrend.
Experts feel the strong rally looks possible only if the index closes decisively above 11,225 levels, till then the consolidation may continue.
For the time being, Mazhar Mohammad of Chartviewindia.in advised traders to remain neutral on index by adopting a stock-specific approach.
Nifty50 after opening higher touched an intraday high of 11,225.65, but erased all gains gradually and turned volatile around 11,100 levels. Finally, the index managed to settle above same mark, at 11,101.70, up 6.40 points.
"Nifty50 appears to be on a pause mode as it has given up almost 1 percent of the gains from intraday high of 11,225 levels before signing off the session with an indecisive Spinning Top kind of formation. Hence, in next trading session it is critical for this counter to sustain above 11,064 levels to retain positive bias," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
According to him, if the index slips below the said levels then it can attract selling pressure on intraday basis with targets between 11,013 – 10,950 levels. "In that scenario sideways consolidation can be expected as long as Nifty sustains above 10,900 levels.
However, "trend will not decisively change in favour of bears unless Nifty closes below its 200-day simple moving average whose value is present around 10,855 levels. Contrary to this strength shall resume on a strong close above 11,225 levels which can then facilitate Nifty to eventually test recent swing high of 11,341 levels," he said.
India VIX fell by 1.06 percent to 23.56 levels. "Decline in VIX from its recent bounce of 25.69 suggests that Bulls are using any decline as a buying opportunity and overall trend could remain bullish," Chandan Taparia of Motilal Oswal said.
Option data indicated that the immediate trading range for Nifty may remain at 10,800 to 11,300 zone for coming few days.
Maximum Put open interest was at 11,000 followed by 10,000 strike, while maximum Call open interest was at 11,500 followed by 12,000 strike. Minor Call writing was seen at 11,500 and 11,400 strikes while minor Put writing was seen at 11,100 then 10,600 strike.
Bank Nifty opened positive and headed towards 21,900 zone but failed to hold its recovery and settled the day on flattish note near to 21,500 zone.
The index closed 19.50 points higher at 21,510 and formed a bearish candle which could be similar to a Shooting Star kind of pattern on the daily charts.
"The index is hovering near to 50 DEMA which indicates a tug of war at key moving averages. Mechanical indicators are turning on neutral zones and it requires a decisive follow up to confirm the next momentum. Now if it manages to hold above 21,500 zone, then bounce could be seen towards 22,000 then 22,250 levels while on the downside immediate support is seen at 21,250 then 21,000," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Positive setup was seen in Hindalco Industries, Bata India, Tata Motors, Eicher Motors, JSW Steel, Havells, TVS Motor, Cummins India, Titan Company, Jubilant Foodworks and Maruti Suzuki while weak structure was seen in Pidilite Industries and Shriram Transport Finance, he added.
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