market outlook: Tech View: Nifty forms Spinning Top; but traders turn indecisive

Nifty50 advanced on Thursday to hit a fresh record high of 12,389 in intraday trade but witnessed some selling pressure, as investors turned indecisive at higher levels.

This eventually led the index to form a ‘Spinning Top’ candle on the daily chart. Before closing 0.09 per cent higher at 12,356, the index shuttled between a high and low of 12,389 and 12,315, respectively.

A Spinning Top occurs when there is little price action during the day, signalling indecision about the future direction.

“The market witnessed a day of consolidation on the expected lines. Nifty saw a better-than-expected opening. However, it pared those gains to slip into the negative territory. Thereafter, it spent the day in a capped range as it ended with minor gains. In the process, it has marked a spinning top,” said Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst, Gemstone Equity Research & Advisory.

A close observation of last three sessions reveals the index is almost flat on a closing basis around 12,350 level, without adding any incremental gains.

“It appears that Nifty is in need of a fresh breakout on either direction to add momentum. However, as our twin momentum oscillators generated a fresh sell signal we expect a sideways move with negative bias for next couple of sessions,” said Mazhar Mohammad, Chief Strategist-Technical Research & Trading Advisory, Chartviewindia.

“On the downside, weakness shall get confirmed on a close below 12,278 level, which can provide a shorting opportunity, whereas a positive move beyond 12,389 level may extend the rally up to 12,450-490 levels, but the same shall peter out sooner than later. For time traders should remain neutral on the index,” said Mohammad.

On the other hand, the broader market outpaced the benchmark index. Nifty Midcap100 and Smallcap100 indices rose 0.83 per cent and 0.54 per cent, respectively.

Manav Chopra, CMT, Head Research-Equity, Indiabulls Ventures, said: “We have been bullish on midcap and smallcap space for a while, which has played out well and is likely to gain further steam.”

Nifty Bank index settled almost flat at 31,853. The index, which opened the day at 31,810 against the previous close of 31,825, hit an intraday high and low of 31,989 and 31,692, respectively.

Commenting on the bank index, Chopra said that Bank Nifty too witnessed consolidation as the activity was more in the broader markets.

“A move above 32,000 would be a bullish sign and a signal to the end of near term consolidation, however, failure to breach 32,000 zone on a sustainable basis could trigger profit booking for the index. In the near term, key support is at 31,450 while a major support for the bulls stands at 30,900 to protect the downside,” he said.