Nifty failed to hold on to 11900 mark and formed a small bodied bullish candle that resembled a Shooting Star kind of pattern on the daily chart.
After opening lower at 11861, Nifty immediately gained strength to hit an intraday high of 11949. It saw some profit booking at higher level in the last hours and ended the day at 11896.80, up 23 points.
A Shooting Star pattern is formed when the index comes under selling pressure as traders start booking profits at higher level. The pattern is usually formed in an uptrend and is treated as a reversal pattern, which requires confirmation that the trend will get reversed in the near future.
Nifty traded higher for the third consecutive day but remained in consolidative mode, with profit booking at higher level in the last couple of hours of trade forcing the index off the day's high.
Markets traded range bound and ended marginally higher amid weak global cues. The benchmark opened in the red but buying in the select index majors especially from IT and banking majors pared the losses in no time. It hovered range-bound thereafter and movement on the stock-specific front kept the participants busy.
The strength of Indian market is supported by the good Q2 results announced till date, in expectation of a further fiscal stimulus and drop in the rate of daily covid cases. Till date the optimism of the market is limited to blue-chips and sectors like IT & Banks. To improve the breadth of the market in the future, a lot will depend on the trend of Q2 result, which has a very positive view.
This buoyancy was also supported by global trend which faded due to lack of consensus in the US to sign a fiscal package before the election and no hope of talks between EU-UK. Volatility is expected going forward but market will maintain its optimism in-line with stock-wise Q2 result, size of the domestic stimulus and global developments.
Despite positive price action for the day, Nifty appears to have witnessed intraday profit booking from the exact resistance point of 11950 level, which depicted a Shooting Star kind of formation with long upper shadow but with relatively lower candle body.
Hence, next trading session if the index slips below 11837 then it can attract intraday selling pressure and can make an attempt to bridge the bullish gap present between 11820 /11789 level registered on 19th October 2020.
A strong uptrend is unlikely in the coming days unless the index closes above 12025.
Contrary to this if the bulls manage to defend 11837, then the trade for the next session can be sideways with positive bias with the likelihood of retesting the recent corrective swing high of 12025 level.
Overall price and data setup suggests bounce may be seen, but multiple hurdles and supply pressures at higher zones could restrict its upside momentum.
As trade seems to be sideways, Traders should remain neutral on the index.
Sector Wise :- IT index gained 1 percent followed by the pharma and auto, while energy, FMCG, metal and PSU bank indices closed in the red.
-Someshwar, Technical analyst, Equidius Research
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