Technical View: Nifty forms Shooting Star pattern, 9,050 crucial for downside
The Nifty50 witnessed some selling pressure at higher levels in the last hour of trade and closed off the day’s high on May 21 due to weakness in banking & financials and worries over a spike in coronavirus cases.
The index settled above 9,100 but failed to hold on to strong intraday gains to form a Shooting Star weak pattern on daily charts.
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 experts say it will require confirmation before concluding that the trend will get reversed in the near future.
Experts expect rangebound trade to continue in the coming days and say 9,050 can be a crucial level for a downside.
The Nifty50 opened higher at 9,079.45 and extended gains to hit an intraday high of 9,178.55 in the afternoon. But saw some profit booking at higher levels in the last hour of trade and lost around 70 points from the day’s high. The index closed at 9,106.25, up 39.70 points.
“Despite the bulls making a strong attempt to rally, they failed to hold on to the gains at higher levels, which resulted in a Shooting Star kind of weak formation,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said Nifty futures slipped into 35 points discount to the spot, perhaps pointing to lack of conviction among the bulls at higher levels.
In the next trading session if this counter trades below 9,056, then it can come under intraday selling pressure. A close below 9,000 can drag the index towards the lower end of the trading range placed between 9,160 and 8,800 levels, he added.
A strong close above 9,160 can extend the upswing into the 9,281– 9,350 zone, he said.
Traders should short the Nifty below 9,050 and look for a target close to 8,900 with a stoploss above the intraday high, Mohammad said.
Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities said the market would remain volatile in the short run.
Technically, for the next few trading sessions, 9,025 should act as a trend decider level, above which uptrend continuation can wave up to 9,150-9,250 levels, Chouhan. However, trading below 9,025 can open another correction till 8,880, he said.
The Bank Nifty also opened higher at 17,901.95 to touch the day’s high of 18,200.70 but there was some selling pressure in the last hour led by private banks and it dropped to an intraday low of 17,658.55.
The index closed lower by 105.10 points, or 0.59 percent, at 17,735.10 and formed a small-bodied bearish candle on daily charts.
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