Market Outlook:
Nifty extended intraday losses after finding resistance at the high of the day and closed below the psychological mark of 6050 on Tuesday. It seems traders chose to take some profits off the table after the Reserve Bank of India cut the repo rate by 25 bps to 7.75 percent and the cash reserve ratio by 25 bps to 4 percent. In fact, there was so much resistance and subsequent selling pressure, that prices were able to close the day lower than the open forming a Shooting Star candle, signaling bearishness. Final closing for the index came at 6049.90 down 24.90 points with an intraday range 6111.80-6042.45.
Bank of Baroda -2.89 %, Hindalco Industries -2.87 %, Bajaj Auto -2.79 %, HDFC Bank -2.65 % and Bharti Airtel -2.36 % were among the top index losers. The breadth of the market too was negative with 531 gainers and 958 losers.
Nifty:
Shooting Star is an extremely helpful candlestick pattern to help traders visually see where resistance and supply is located. After an uptrend, the Shooting Star pattern can signal to traders that the uptrend could be over and that long positions should probably be reduced or completely exited.
However, in technicals there is a rule-of-thumb which says that other indicators should be used in conjunction with the Shooting Star candlestick pattern to confirm the sell signals. So here we will prefer waiting a day or two before calling it a top and will see if prices continued falling resulting in the break of upward sloping trendline that is overlapping the 20 DMA (both packed at 5998). “Stay bullish until then.”
Support: Major support level 5998.
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Investment Ideas
- SUN Pharma @ Rs. 712 (Target Price: Rs. 800)
Trading Ideas
- Positive bias - Sun Pharma (Target 770), JM Financial (Target 26), RCOM (Target 95), Tv18 (Target 38) and Ranbaxy (Target 510). Traders maintain stop loss accordingly.
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