Technical View: Nifty forms a ‘Spinning Top’ type pattern; all eyes on election outcome

If the index manages to hold above 10,350 on closing basis then chances of the rally to continue till 10,409 and 10,490 is possible. If the index slips below 10,140 in the next couple of trading sessions then further slide towards 10,00o looks possible.

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The Nifty50 which opened with a gap on the higher side failed to hold on to gains and closed marginally below its opening level making a ‘Spinning Top’ kind of pattern on the daily charts on Friday.

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 with a 100-point gap on the higher side but came under selling pressure near 10,350-10,400 levels. Now, all eyes are on Monday when the Assembly elections results will be announced.If the index manages to hold above 10,350 on closing basis then chances of the rally to continue till 10,409 and 10,490 is possible. If the index slips below 10,140 in the next couple of trading sessions then further slide towards 10,00o looks possible.

The Nifty50 which opened at 10,345 rose to an intraday high of 10,373. It slipped to an intraday low of 10,319 before closing the day 81 points higher at 10,333.

“The Nifty index failed to hold its half of the gains and corrected by around 50 points from higher levels. It formed a Spinning Top candle on the Daily chart and closed near to its supply trend line by connecting recent swing highs of 10,490 and 10,409,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“It has been moving in a falling wedge from last eight weeks and a decisive hold above 10,330 could take it towards 10,409 then life high of 10,490 levels. While on the downside now supports are shifting higher at 10,250 then 10,200 zones,” he said.

On the options front, maximum Put open interest was seen at 10,000 followed by 10,200 strikes while maximum Call OI was seen at 10,500 followed by 10,400 strikes.

Fresh Put writing was recorded at 10,300 and 10,200 strikes while Call writing remains intact at 10,450 and 10,500 strikes. Put writing at higher strike suggests shifting of the support while intact Call writing at 10,450 and 10,500 could restrict its upside momentum, say experts.

Reacting to the exit polls which signals a clean sweep of BJP in states of Gujarat and Himachal Pradesh lifted investor sentiment. To avoid uncertainty, traders can book profits in the opening tick once market resumes trading on Monday.

“In line with exit poll result Nifty50 opened with a strong gap up opening and thereafter it failed to add much value addition to its opening price which resulted in Doji kind of indecisive formation,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Presuming that exit poll result will get exactly translated into reality on Monday then we may witness another euphoric upmove but it may fizzle out as the market has already rallied from the lows of 10,140 levels in anticipation of this result,” he said.

Mohammad advises traders to book profits by making use of this gap up opening and look for sustainability of the rally beyond 10,352 levels post-Monday’s session.

“In the event of this rally sustaining beyond Monday then that will positively impact the trends which may eventually extend up to 10,600 kinds of levels. On the other hand, any fall below 10,140 in next couple of trading sessions shall signal intermediate top around Monday’s high,” he said.

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