Technical View: Nifty forms Shooting Star pattern on weekly chart, can correct to 14,600


The Nifty50 fell for the second consecutive session, slipping below the psychologically important 15,000-mark on March 5, dented by rising US bond yields and oil prices. All sectoral indices ended in the red, with banks, IT, metals and pharma stocks seeing a major correction.

The index opened gap down at 14,977.95 and traded lower for the major part of the session to hit an intraday low of 14,862.10 in the afternoon. It closed at 14,938.10, down 142.70 points or 0.95 percent.

It formed a small bearish candle that resembled a Spinning Top pattern on the daily charts and a Shooting Star pattern on the weekly scale. The index gained 2.8 percent during the week.

A spinning top is often regarded as a neutral pattern that suggests indecisiveness in the market. It can be formed in an uptrend as well as in a downtrend.

A ‘Shooting Star’ pattern is formed when an 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 would require confirmation before it can be concluded that the trend will get reversed in the near future.

Intraday traders should take short side exposure if the Nifty trades below 14,862 and look for a modest target of 14,750 by placing a stop above intraday high, said Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.

“In the next trading session, if the bulls fail to defend 14,862 levels, then the weakness shall get initially extended towards 14,628 levels,” Mohammad said.

Unless the market stabilises around 14,900, the trajectory shall remain in the southern direction, which may eventually lead to the index testing 14,467, he said.

If the index stabilises around 14,900, the near-term trend may once again turn sideways but with a positive bias in the 14,900–15,250 range. Strength in the index shall be expected to resume if it manages to get past 15,273, Mohammad said.

India VIX moved up by 5.84 percent from 24.15 to 25.16 levels. “VIX is turning highly volatile in a broader range of 21.80 to 29.64 from the last nine trading sessions,” Chandan Taparia of Motilal Oswal. VIX needs to cool down below the 21-20 zone for the bulls to make a comeback.

On the options front, maximum Put open interest was seen at 14,000 followed by 14,500 strike, while maximum Call open interest was at 16,000 followed by 15,000 strike. Call writing was seen at 15,500 then 15,000 strike, while Put writing was seen at 14,000 then 14,500 strike.

The options data indicates that the Nifty could see a wider trading range in between 14,500 and 15,500, while the immediate range could be 14,750- 15,250 levels.

The Bank Nifty opened gap down at 35,458.50 and remained under pressure throughout the day. Banking stocks are not holding and as a result, the index ended the day at 35,228.20 with a loss of 574.30 points or 1.60 percent.

The index formed a bearish candle on the daily scale and continued forming lower highs-lower lows of the last two sessions.

“The Bank Nifty has to cross and hold above 35,500 to witness a bounce towards 36,000 and 36,250, while on the downside, support is seen at 35,000 then 34,500 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

On the stock front, a bullish setup was seen in Vedanta, Maruti Suzuki, Mahanagar Gas, Kotak Mahindra Bank, Hero MotoCorp, Colgate Palmolive, HUL, UltraTech Cement and Reliance Industries. Weakness was visible in Apollo Hospitals, Canara Bank, SAIL, IndusInd Bank, Tata Motors, Manappuram Finance, Wipro, M&M Financial, PNB, Shriram Transport Finance, SBI and Bosch.

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