Tech View: Nifty50 forms 'Shooting Star', indicates fatigue; index may extend slide
NEW DELHI: Nifty50 on Friday tumbled below the 9,200 level and formed a pattern similar to a 'Shooting Star' on the daily chart, suggesting the positive momentum in the market may have reversed and further correction is on the cards.
Friday was the first time in eight sessions when the 50-pack index closed below its opening level. The index formed a green real body with large upper wick and small lower wick on the daily chart. While some of the selling can be attributed to weak global cues, select technical indicators too were turning negative.
On technical front, the MACD line has fallen and is close to break below the signal line. The index has closed below its 5-Day EMA that stood at 9,215 level.
"Nifty50 registered Shooting Star kind of formation on weekly as well as on daily charts, suggesting profit booking has kicked in the market. Two trend following techniques with higher accuracy in calling short-term turning points have generated a sell signal, suggesting that this correction is likely to be extended further for next couple of trading sessions," said Mazhar Mohammad, Chief Strategist - Technical Research & Trading Advisory at Chartviewindia.in.
The Nifty50 opened the session on a weak note. It hit a day's high of 9,250.50, which was still lower than previous close of 9,261.95. The hit a day's low of 9,188.10, but eventually closed at 9,198.30, down 63.65 points, or 0.69 per cent.
"The velocity of the market is slowing down with small movements occurring on each successive days. This is an indication of fatigue in the market, but considering the longer term bull market cycle that Indian market is currently witnessing; these bouts of weakness, slow movements and stock specific movements shall continue to play out," said Jimeet Modi, CEO, SAMCO Securities.
Mohammad said that selling in the Nifty50 can intensified it the index falls below 9,163.
"In that scenario we advise even positional traders to square off their bets and initiate short positions with initial targets close to 9,020 level. However, Nifty50 has some decent support in the zone of 9,190- 9,163 zone and, to regain strength, bulls need to push the indices beyond 9,250 on a closing basis. Till then, the threat of short term reversal continues to looms large on the indices," Mohammad said.
Friday was the first time in eight sessions when the 50-pack index closed below its opening level. The index formed a green real body with large upper wick and small lower wick on the daily chart. While some of the selling can be attributed to weak global cues, select technical indicators too were turning negative.
On technical front, the MACD line has fallen and is close to break below the signal line. The index has closed below its 5-Day EMA that stood at 9,215 level.
"Nifty50 registered Shooting Star kind of formation on weekly as well as on daily charts, suggesting profit booking has kicked in the market. Two trend following techniques with higher accuracy in calling short-term turning points have generated a sell signal, suggesting that this correction is likely to be extended further for next couple of trading sessions," said Mazhar Mohammad, Chief Strategist - Technical Research & Trading Advisory at Chartviewindia.in.
The Nifty50 opened the session on a weak note. It hit a day's high of 9,250.50, which was still lower than previous close of 9,261.95. The hit a day's low of 9,188.10, but eventually closed at 9,198.30, down 63.65 points, or 0.69 per cent.
"The velocity of the market is slowing down with small movements occurring on each successive days. This is an indication of fatigue in the market, but considering the longer term bull market cycle that Indian market is currently witnessing; these bouts of weakness, slow movements and stock specific movements shall continue to play out," said Jimeet Modi, CEO, SAMCO Securities.
Mohammad said that selling in the Nifty50 can intensified it the index falls below 9,163.
"In that scenario we advise even positional traders to square off their bets and initiate short positions with initial targets close to 9,020 level. However, Nifty50 has some decent support in the zone of 9,190- 9,163 zone and, to regain strength, bulls need to push the indices beyond 9,250 on a closing basis. Till then, the threat of short term reversal continues to looms large on the indices," Mohammad said.
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