Technical View: Nifty forms Shooting Star pattern on FO expiry day, experts say hold long positions

Image: Pixabay

Image: Pixabay

The Nifty50 was trading high through the session, though some profit- booking in the late hours saw the index close near the opening levels on February 25, the expiry day for the February futures & options contracts.

The index continued the uptrend for the third consecutive session, driven by metals, pharma, auto, select banking & financials and IT stocks. Positive global cues also supported the market.

The Nifty50 opened higher at 15,079.85 and touched an intraday high of 15,176.50, though there was volatility during the day. The index settled at 15,097.40, up 115.40 points.

It formed a small bullish candle which resembled a Shooting Star pattern on the 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 it would require confirmation before we can conclude that the trend will get reversed in the near future.

Experts feel if the Nifty50 continues to hold the psychologically important 15,000-mark, then fresh record highs are possible in the coming sessions.

Traders who are long to hold their position with a stop loss below 15,000 on a closing basis, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at told Moneycontrol.

“Despite witnessing a gap-up opening, the bulls appear to have failed to capitalise on the same as the Nifty witnessed intraday profit-booking from the highs of 15,176 levels, which depicted a shooting star kind of formation with a relatively long longer upper shadow,” Mohammad said.

Hence, some intraday weakness can be expected if the Nifty slips below 15,065. A short-term weakness can be expected on a close below 15,000, which can once again pull down the index into the sideways zone, according to him.

Nevertheless, positive stance can be retained as long as the Nifty sustains above 15,000 and if the bulls manage to push the index higher beyond 15,173 levels then the strength shall expand initially to 15,271 with eventual targets present around life highs present around 15,430, Mohammad said.

India VIX declined by 5.29 percent from 24.16 to 22.89. The volatility needs to cool down below 21-20 to extend this bounce towards the new high territory, said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

Since it is the beginning of new series, the options data is scattered at different strikes. On the options front, maximum Put open interest was at 14,000 followed by 13,500 strike, while maximum Call open interest was at 16,000 followed by 16,500 strike. The data indicates that the Nifty could see a trading range of 14,700-15,400 for coming sessions.

The Bank Nifty opened gap-up at 36,763.15 but failed to surpass its hurdle of 37,250 and slowly drifted lower. After a quick rally in the previous session, the banking index took a breather and closed the day 96.70 points higher at 36,549.

The index formed a bearish candle on the daily scale but continued its formation of higher highs-higher lows of the last two sessions.

“The Bank Nifty has to continue to hold above 36,000 to witness an upmove towards 37,000 and 37,250, while on the downside support is seen at 36,000 and 35,700 levels,” Taparia said.

On the stock front, bullish setup was seen in Tata Chemicals, Coal India, UPL, Torrent Power, BPCL, Piramal Enterprises, Hindalco, NTPC, Reliance Industries, Bharat Electronics, Tata Motors, Voltas, IndusInd Bank, HPCL, L&T Finance Holdings, Muthoot Finance, Tata Steel and Grasim. Weakness was seen in Marico, Nestle India, Kotak Mahindra Bank, Divis Labs and Pidilite Industries, he added.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Moneycontrol.