Nifty settled above 9100 but failed to hold on to strong intraday gains to form a Shooting Star weak pattern on daily chart.
Nifty opened higher at 9079 and extended gains to hit an intraday high of 9178 in the afternoon. But saw some profit booking at higher level in the last hour of trade and lost around 70 points from the day's high.
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 experts say it will require confirmation before concluding that the trend will get reversed in the near future.
Despite the bulls making a strong attempt to rally, they failed to hold on to the gains at higher level, which resulted in a Shooting Star kind of weak formation.
Nifty futures slipped into 35 points discount to the spot, perhaps pointing to lack of conviction among the bulls at higher level.
Markets are expected to trade in a range, until further directions from the government, while stock specific moves, based on the ongoing earnings season and sectoral impact of the lockdown measures, will continue.
Markets remained range bound today following concerns expressed by Moody's on the liquidity stress as a fallout of asset quality deterioration which kept Financials muted during the day. However Automotive stocks together with select pivotals like Asian Paints & ITC ensured a positive close for the day.
In the next trading session if this counter trades below 9056, then it can come under intraday selling pressure. A close below 9000 can drag the index towards the lower end of the trading range placed between 9160 and 8800 level.
Traders should short the Nifty below 9050 and look for a target close to 8900 with a stoploss above the intraday high.
A strong close above 9160 can extend the upswing into the 9281/ 9350 zone.
Sector Wise :- Except BankNifty other indices ended in the green. Midcap and Smallcap indices rose over 0.5 percent each.
- Someshwar, Technical analyst, Equidius Research