Gaurav Ratnaparkhi of Sharekhan by BNP Paribas said the bearish view holds true as long as the Nifty trades below the recent high of 10,941.
The market failed to hold on to 10,800 level on the Nifty, but maintained positive momentum for the third straight session on December 13 backed by Asian cues and rate cut hope after further fall in November retail inflation.
The Nifty 50 climbed 53.90 points to 10,791.50 and the BSE Sensex gained 150.57 points to close at 35,929.64 after hitting 36,000 level in intraday trade.
After a three-day rally with around 500 points gain and volatility in the second half of the third day may be an indication that there could be some profit booking in the coming session, experts said.
"Having placed at the key resistance (10,850-10,900 levels), and a formation of confusion type candle pattern at the highs, is signalling a possibility of minor profit booking," Nagaraj Shetti, Technical Research Analyst at HDFC securities told Moneycontrol.
Immediate support is now placed at 10,740 levels, he said.
The Nifty 50 formed a bearish candle which also resembles a 'Spinning Top' kind of pattern on the daily charts.
A Spinning Top candle is often regarded as a neutral pattern which suggests indecisiveness among both bulls as well as bears and can be formed in an uptrend as well as in a downtrend.
When a Spinning Top is formed in an uptrend, the one we are in right now especially after two string days, suggests that the buyers might be losing conviction and a possible top could be in place, but will still require confirmation.
"The hourly momentum indicator that was pushed towards the overbought zone formed a negative divergence & turned its trajectory down today. Thus, overall set up suggests that this is a high probability area for the index to start the next leg down," Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas said.
The bearish view holds true as long as the Nifty trades below the recent high of 10,941, he added. "On the downside, 10,700-10,670 shall act as a key support zone below which steep downside can be expected."
The broader markets continued to outperform frontliners with the Nifty Midcap rising 0.7 percent and Smallcap gaining 1 percent. All sectoral indices barring Metal ended in the green.
India VIX fell by 3.24 percent to 15.29 levels. It has seen a sharp cut of 25.89 percent in the last three sessions which suggests that bulls are now getting a grip on the market with the expectation of limited downside.
Key support and resistance level for Nifty
The Nifty closed at 10,791.55 on December 13. According to Pivot charts, the key support level is placed at 10,747.83, followed by 10,704.12. If the index starts moving upward, key resistance levels to watch out are 10,836.93 and then 10,882.32.
Nifty Bank
The Nifty Bank index closed at 26,816.35, up 172.50 points on December 13. The important Pivot level, which will act as crucial support for the index, is placed at 26,709.52, followed by 26,602.68. On the upside, key resistance levels are placed at 26,937.32, followed by 27,058.28.
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