Nifty forms shooting star pattern; Bank Nifty holds key for further upmove

Nifty opened the session with a gap-up on Thursday and traded within the first-hour range during the majority part of the day.    

In the latter part of the trade, it registered an intraday high of 15,176.50 but failed to sustain at higher levels due to expiry day jitters while at the time of closing, it dipped almost 79 points from the day’s high. Despite shaving off almost 79 points from the day’s high, it managed to log gains of 0.77 per cent and closed just shy of the 15,100 mark.     

The broader markets continued to witness healthy buying interest as Nifty Midcap-100 and Smallcap-100 surged 1.53 per cent and 1.43 per cent, respectively. As a result, the advance-decline ratio was in the favour of advancers. India Volatility Index or VIX dropped about 5 per cent and slipped below the 23-mark. Amongst the sectoral indices, Nifty Metal jumped nearly 4 per cent, followed by Nifty Realty, which gained about 1.7 per cent. On the other hand, Nifty FMCG and Nifty Financial Services dropped marginally.     The price action of the day formed a small-bodied candle with a long upper shadow, which resembles a shooting star formation. Nifty has moved almost 500 points from the lows of 14,651.85 to the high of 15,176.50. With this, it has retraced almost 61.8 per cent of the downfall from all-time highs. It has also moved above the 5-EMA and 21-EMA. Both the short-term moving averages have started to trend up. Moreover, they are in the desired sequence. Hence, this is a positive sign.     

Technically, the index might have logged gains of 115 points on Thursday. However, the day’s range was confined within 111 points while the gains were largely due to the gap-up opening. Since Thursday’s trading range was the lowest in the last seven trading sessions, it led to the formation of the NR7 pattern. So, in the coming trading sessions, the high & low of Thursday’s session will be important to watch out for the traders. A sustainable move above the levels of 15,175-15,200 would open gates towards 15,320-15,340 levels. Meanwhile, a break below the level of 15,065 would give an advantage to the bears and they may try to re-test 21-EMA on the downside.     

Along with the high & low of Thursday’s session, traders should also keep an eye on the performance of Bank Nifty, mainly because of two reasons: Firstly, Bank Nifty components carry almost 34 per cent weightage and the strong rally, which was witnessed in the markets, was powered by Bank Nifty. The level of 36,340 is a key level to watch on the downside for Bank Nifty. A breach of this support level could lead to some sideways action.