Technical View | Nifty sees Spinning Top pattern formation, experts say index may slip below 16K

The Nifty50 closed at fresh seven-month low on March 4 as the accelerated attack to demilitarisation and invasion of Ukraine by Russia and elevated oil prices amid supply worries spooked markets globally. The index fell for the third consecutive session and formed a bearish candle, resembling a Spinning Top kind of pattern formation on the daily charts. The pattern indicates indecisiveness among bulls and bears.

For the week also, there was bearish candlestick pattern formation as the index lost 2.5 percent, continuing downtrend for the second consecutive week. The index has broken last Thursday's closing low (16,247) and also hit the crucial support of 16,130, indicating the bearish sentiment can prevail for some more time and possibly can drag down the index below 16,000 too, experts feel.

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.

The volatility cooled off a bit on Friday, but overall it remained on the higher side, hinting the continuation of volatile swings in the market ahead. India VIX, the fear index, declined seven-tenth of a percent at 27.96 levels.

The Nifty50 opened gap down at 16,339 and remained in control of bears throughout the session to hit a day's low of 16,133.80, before winding up the session at 16,245, the lowest closing level since August 6, down 252.60 points or 1.53 percent.

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"Nifty50 registered a Spinning Top kind of formation with a large trading range of 336 points hinting at a volatile session. At today's low of 16,133 levels, Nifty seems to have hit the critical support, on medium-term charts, which is present at around 16,130 levels," says Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.

In case, he says if Nifty slips below 16,130 then the next best support is placed at 15,850. Therefore from current levels, a pullback rally cannot be ruled out from the zone of 16,100 – 15,800 levels, Mohammad adds.

He feels in the very short term, market tends to move in line with the global uncertainties but "further fall can be an opportunity for long-term investors whereas short-term traders will be better off by limiting themselves to the fence," he advises.

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On option front, maximum Call open interest was seen at 18,000 strike followed by 17,500 strike while maximum Put open interest was seen at 16,500 strike then 16,000 strike. There was marginal Call writing at 16,500 strike, then 16,700 strike while marginal Put writing was seen at 16,000 strike.

The above-mentioned option data indicated that a wider trading range for the Nifty50 could be 15,800 to 16,700 levels in the coming sessions.

Bank Nifty opened negative at 34,526 and drifted towards 34,100 levels in the initial part of the day. It took support at lower zones and once rallied 1,000 points from day's low to hit an intraday high of around 35,100. However, the level failed to sustain and eventually the index closed with 536.50 points or 1.5 percent loss at 34,408, forming Doji kind of pattern on the daily charts.

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"Till the index holds below 35,000 mark, weakness could be seen towards 34,000 and 33,500 levels, whereas resistance can be seen at 35,250 and 35,500 levels," says Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

On the stocks front, he says positive setup was seen in ITC, Tech Mahindra, L&T Infotech, Mphasis, Wipro, Infosys, Cipla and HCL Technologies.

However, IRCTC, Jubilant Foodworks, Aarti Industries, TVS Motor, Motherson Sumi, Asian Paints, Maruti Suzuki, Hero MotoCorp, SRF, Tata Motors, M&M, United Breweries, Biocon, HUL, Pidilite Industries and L&T Finance Holdings saw weakness, he adds.