Technical View: Nifty forms ‘Spinning Top’ pattern; tread with caution in January series

Market

The Nifty50 which started on a bullish note on Thursday failed to hold gains and closed near its opening level making a ‘Spinning Top’ kind of indecisive pattern on the daily candlestick charts.

Spinning Top is often regarded as a neutral pattern which suggests indecisiveness on the part of both bulls as well as bears. It can be formed in an uptrend as well as in a downtrend.

The index opened higher came under selling pressure in the last 30-minutes of trade and pulled the index below 10500. It hit an intraday low of 10,460 before closing the day at 10,477.90 whch was also around its 5-days exponential moving average, down 12 points.

Investors are advised to tread with caution in January series as the momentum seems to be waning and if the index consistently trades below 10,470 then further correction towards 10,400 cannot be ruled out while a close above 10552 levels could change the game in favour of bulls.

“The Nifty50 registered a spinning kind of indecisive formation as it signed off the expiry session on a negative note. However, as we have been pointing out for last couple of trading sessions, weakness on lower time frame is getting more pronounced as for almost last three sessions,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“The Nifty50 hardly moved in a range of around 90 points and that too after witnessing consolidation breakout kind of situation in last Tuesday’s session. This is clearly suggesting that market is running out of steam. Hence, it looks prudent for traders to wait for signs of strength rather buying the dip in anticipation of a fresh breakout,” he said.

Mohammad further added that if the weakness persists then Nifty50 should initially head towards 10426 levels where as correction shall get accelerated if it slips below 10400 on closing basis. Contrary to this any strength beyond 10552 on closing basis shall take the indices towards 10650 levels, he said.

India VIX fell down by 1.54 percent at 12.29. VIX has to hold below 13-12.50 zones to support the overall Bullish bias in the market.

On the options front, for the January series, maximum Put open interest is at 10000 followed 10300 strike while maximum Call OI is at 10700 followed by 10800 and 10500 strike.

“OI scattered at the beginning of new series and option band signifies a broader trading band between the range of 10300 to 10700 for the next coming sessions,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The Nifty50 index formed a Spinning Top candle followed by a Bearish Engulfing on previous session. It witnessed a choppy start but volatility was seen in last hour of the session as it fell down from its intraday high of 10534 to 10460 levels,” he said.

Taparia further added that Nifty has to continue to hold above 10450 zones to extend its move towards 10550 then 10600 while on the downside major support is seen at 10400 levels.