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Nifty forms Shooting Star candle

New candle indicating a trend's exhaustion; Earlier, resistances at 15988, and 16178 are placed in the gap zone. Unless the index clears these resistances, we can assume that the current upside move is only a counter-trend

Nifty forms Shooting Star candle
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After a positive opening, the benchmark index closed negative on a quarterly ending. The Nifty was down by 18.85 points and closed at 16780.25. The Bank Nifty, Fin Nifty and Energy indices closed positively by half a per cent. The Nifty Metal index is the worst performer with 1.99 per cent. Auto, Realty and IT indices declined by over one per cent.

The other sector indices declined by 0.1 per cent to one per cent. The market breadth is negative as 1362 declines and 756 advances. About 34 stocks hit a new 52-week low, and 81 stocks traded in the upper circuit. Reliance, Infosys and Maruti were the top trading counters today in terms of value.

After two days of decline, the Nifty has formed a higher high and higher low candle. It formed a Shooting Star candle, indicating a trend's exhaustion. As the shooting star doji formed at the confluence level, the probability of making it high is remote.

Though it made a higher high, it failed to close above the 38.6 per cent retracement level of the prior downside move. It was up by 223.60 points in the last five trading sessions. The benchmark index has declined by 810.15 points or 4.88 per cent in the June month.

For the last 18 trading sessions, the 21EMA is acting as a strong resistance. As mentioned earlier, there are resistances at 15988, and 16178 are the resistances placed in the gap zone. The 50DMA is placed at 15247. Unless the index clears these resistances, we can assume that the current upside move is only a counter-trend. Because of the monthly expiry, the trend is indecisive.

First, it has to clear the last Monday's high of 15927, which is a bearish belt hold candle. The RSI is below 50 and declined for the third straight day. It failed to clear the slopping line resistance line. On a 75-minute chart, the index has broken the upward channel support with a big bearish candle. As it is within the moving average ribbon, we can assume that the index is in a neutral zone. In any case, it declines below 15725, is negative and will resume the downtrend. It is better to be cautious on the upside. Avoid aggressive leveraged positions.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)

T Brahmachary
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