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Tech View: Nifty forms Shooting Star pattern, signalling profit taking ahead

The index formed a candle similar to a 'Shooting Star' on the daily chart.

, ETMarkets.com|
Last Updated: Jun 01, 2020, 05.02 PM IST
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The latest bout of buying emerged after momentum indicator MACD gave a buy signal in Friday's trade.
New DELHI: Nifty50 climbed over 200 points on Monday to take its winning streak into the fourth straight session. In this round of the rally, the index has climbed nearly 800 points to 9,800 level.

The latest bout of buying emerged after momentum indicator MACD gave a buy signal in Friday's trade. After making higher highs and lows for a few sessions, the index has come closer to overbought levels, as suggested by the 14-day RSI, which opens up possibility for profit taking.

For the day, Nifty closed at 9,826, up 245.85 points or 2.57 per cent.

The index formed a candle similar to a 'Shooting Star' on the daily chart, said Mazhar Mohammad of Chartviewindia.in, who believe such a formation may pave the way for profit booking, if Nifty50 slips below 9,706 level in the next session.

"In that scenario, today’s bullish gap present in the 9,706–9,598 zone may act as a support, if this rally has further legs. By the principle of polarity, the 55-day EMA, which offered resistance on the way up can now act as a support , whose value is placed at 9,529 level. Hence, going forward strong support may emerge in the 9,700-9,529 zone," Mohammad said.

Check out the candlestick formations in the latest trading sessions

Rahul Sharma of JM Financial Services said market breadth has improved considerably and Nifty50 could aim for the five-figure mark of 10,000. "Technically, Nifty has support at 9,700 level and resistance at 9,900 and 10,200 levels. Traders are advised to use trailing stop losses for longs and utilise dips as buying opportunities," he said.

The daily Bollinger Bands, said Gaurav Ratnaparkhi of Sharekhan, are not yet showing signs of expansion, which suggests that a runaway rally in Nifty is unlikely. On the other hand, Rajesh Palviya of Axis Securities said momentum indicator Stochastic has flatten in the overbought zone, indicating a slowdown in the upside momentum.
"In a shorter time frame, the index has turned southward from the overbought territory, suggesting that minor profit booking maybe on the cards before it resumes the uptrend,” said Aditya Agarwala of YES Securities.
(What's moving Sensex and Nifty Track latest market news, stock tips and expert advice on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds.)

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