Tech view: Nifty forms Spinning Top; pause in momentum likely
Muted response of the bears to the policy suggests there may not be a big correction ahead.
The index also formed higher highs and higher lows for the ninth session in a row. There could be a pause in the ongoing momentum and the index might trade sideways in the coming sessions. That said, the bullish momentum remains intact.
The formation of a ‘Spinning Top’ candle on the daily chart suggests that the pace of buying is slowing, said Chandan Taparia of Motilal Oswal Securities. He said the index needs to hold above 11,300 for any upside towards the 11,400- 11,435 zone.
During the day, the index hit a high of 11,390 before witnessing strong volatility in an eventful day. The index eventually closed 10.30 points, or 0.09 per cent, lower at 11,346. Sameet Chavan of Angel Broking maintained his bullish stance on the index and ruled out any major correction in the near term.
“The formation of a high wave could act as a reversal pattern for the Nifty, only on the confirmation of weakness,” said Nagaraj Shetti of HDFC Securities,.
The underlying uptrend is still intact and buying could emerge from the lows on any minor correction or consolidation in the coming sessions, he said.
Mazhar Mohammad of Chartviewindia.in said muted response of the bears to the RBI policy outcome suggests there may not be a bigger correction going forward.
“The market may consolidate to adjust the readings on the technical oscillators, which are in the extremely overbought zone, as the market has relentlessly rallied for the past nine sessions. Once this corrective and consolidation phase gets over, the Nifty50 can be expected to resume its upward move with initial targets placed around the 11,450 level,” he said.
On the hourly chart, the Nifty50 faced resistance near the upper end of the dynamic rising channel and is approaching the lower channel line. “In terms of wave structure, the index is forming a Fourth Wave correction on the daily chart. This means that the rise from 10,935 level is incomplete and a leg on the upside looks imminent,” said Gaurav Ratnaparkhi of Sharekhan.