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Technical View: Nifty forms shooting star pattern, 11,150 crucial for further upside

August 19
18:29 2019

The Nifty rebounded sharply on August 19 but erased most of gains in the last hour of the trade to close moderately higher despite strong global cues. The selling in select banks and auto stocks weighed on the market.

The index failed to hold 11,100 levels and formed small bearish candle that resembled a shooting star formation on the daily charts, as selling pressure was seen at higher levels.

A shooting star pattern is formed when the index comes under selling pressure as traders start booking profits at higher levels. This pattern is usually formed in an uptrend and is treated as a reversal pattern, but it would require confirmation before we can conclude that the trend will be reversed in the near future.

The index was finding hurdle near to its 21-day exponential moving average (around 11,150), which could be a crucial level for further upside, experts feel.

After opening higher at 11,094.80, the Nifty extended gains and hit an intraday high of 11,146.90, but the last-hour selling dragged it to the day’s low of 11,037.85. The index closed 6.10 points higher at 11,053.90.

The intraday high was equivalent to the one seen on August 13 on which panic sell-off was witnessed due to global factors. Hence, there seemed to be a stiff resistance around 11,147 levels, Mazhar Mohammad, Chief Strategist, Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.

According to him, if bulls push the index beyond 11,150 on closing basis then upward momentum should strengthen further with initial targets placed around 11,260 and beyond that bigger targets couldn’t be ruled out.

It was important that in the next trading session the Nifty sustained above 11,058, as a breach could drag down the index to 10,900-kind of levels, Mohammad said. Considering the volatile nature of the index, it would be prudent on the part of traders to retain neutral stance, he said.

On the options front, maximum put open interest (OI) is at 11,000 followed by 10,700 strike, while maximum call OI is at 11,500 followed by 11,000 strike.

Minor call writing is at 11,500 and 11,300 strikes, while put writing is at 11,100 then 10,900 strike. Option data suggests that the Nifty could trade in a range of 10,850 to 11,200 zones.

India VIX increased by 0.27 percent to 16.74 levels.

The Bank Nifty failed to hold its gains and drifted towards 28,150 levels. The index closed at 28,186.10, down 31 points. It formed a bearish candle on the daily scale as supply pressure was seen near 28,500 but consolidated in the range of 300 points for most part of the session.

“The index needs to hold and sustain above 28,200 levels to witness a bounce towards 28,500 then 28,750 levels, while on the downside supports are seen at 28,000 then 27,750 levels,” Chandan Taparia, Associate Vice President, Analyst-Derivatives, at Motilal Oswal Financial Services, said.

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