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

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 Nifty 50 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 Nifty 50 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.

The Nifty 50 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.

 further added that if the weakness persists then Nifty 50 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.

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

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.

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.

MORE WILL UPDATE SOON!!

Technical View: Nifty forms a ‘Hanging Man’ like pattern; book partial profits

Investors who are long on Nifty can consider booking partial profits while for the rest of the position a strict stop loss below 10,426 could be placed, suggest experts.

   

The bulls remained in control of D-Street despite weak global cues to take the index to a fresh record high of 10,545.45 on Tuesday. The index formed a bullish candle for the second consecutive day in a row which closely resembles a ‘Hanging Man’ kind of pattern on daily charts.

The index continues to make high highs and higher lows which suggest that the bullish momentum remains intact, but considering the fact we are trading near record highs some consolidation cannot be ruled out.

Investors who are long on Nifty can consider booking partial profits while for the rest of the position a strict stop loss below 10,426 could be placed, suggest experts.

A Hanging Man is a bearish reversal candlestick pattern which is usually formed at the end of an uptrend or at the top. In a perfect 'Hanging Man' pattern either there will be a small upper shadow or no upper shadow at all, a small body and long lower shadow.

The market witnesses a significant selloff in the beginning just like we saw in Tuesday’s trading session but still manages to recoup some of the losses and closes near the opening level.

The Nifty50 which opened at 10,512.30 slipped to an intraday low of 10,477.95 which made a long lower shadow, but then bulls took control and pushed the index to a record high of 10,545.45 which made a small upper shadow.

“Albeit Nifty50 registered a new lifetime high it witnessed a ‘Hanging Man’ kind of formation after moving in a narrow range of around 60 points. However, as momentum is quite strong and favouring bulls it looks prudent to ride the rally with a stop below 10426 levels on closing basis,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Traders are advised to take a cautious stance as we head towards critical resistance points of 10600 – 10,650 levels and they should consider part profit booking in next trading session as we head higher towards 10,600 levels and remain focused on extremely stock specific opportunities,” he said.

India VIX moved up by 3.99 percent at 12.05. Volatility moved higher after declining in the last six trading sessions. Overall lower volatility is supporting the Bullish bias of the market.

On the options front, maximum Put open interest was seen at 10,000 followed by 10,400 strikes while maximum Call OI was seen at 10,500 followed by 10,600 strikes. Significant Put writing was seen at 10500 strikes while fresh Call writing was seen at 10550 to 10700 strikes.

“Shift in Put writing, as well as Call writing to higher strike, suggests shifting of the support. Option band signifies a broader trading band between 10400 to 10600 levels for next coming sessions,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“Nifty formed a Bullish candle on the Daily chart and given the highest daily close with the intraday gains of around 40 points,” he said.

Taparia further added that Nifty has to continue to hold above 10500 zones to extend its move towards 10600-10650 while on the downside supports are seen at 10450 then 10400 levels.

MORE WILL UPDATE SOON!!