Upcoming “star” on D-street?

Finally it seems, Nifty has given a sell sign on Weekly charts after many months. In my last post “Behind Enemy Lines” , i mentioned to go short below 8720 level and we have seen for two sessions that we traded below the same level giving her intentions of further move. Though it doesnt mean we are going to witness strict sell-off from this point of time but we may see some short covering before sliding ahead. Some factors which are supporting my bearish view are block trade selling in banking stocks which are high beta to Nifty Movement, Weakening Global charts and Shifting Option Data Range. Today many of the banking stocks including PSU banks so more volumes than the last 5 days average volume so may be some fund action or profit booking by HNI portfolio holders. Secondly, Global markets are weakening on charts suggesting bearish sentiments over the inflow. Thirdly, option data which was suggesting 8750 as the base until Monday sell-off, has shifted to 8600 by today and on the upper side 9000 resistance has shifted lower to 8800

Now coming to Technicals, though Daily charts may signal a short covering but weekly charts are reflecting a Upcoming Evening star pattern on D-street which could be confirmed with Fridays close. But until now it has satisfied 3 out of 4 rules of the Evening star pattern: 1. First candle should be a long green candle, 2. Second candle should be a Doji , which in our case is Grave stone Doji, with a gap over first candle. 3.  Third candle should open with a Gap down . But only condition remaining to confirm is ” third candle should close atleast at distance equal to half the body of first candle” So looking at other factors above, i feel last condition may be fulfilled by Friday’s close. Which means if we close around 8668 we would confirm the pattern. So the strategy remains intact ” Sell on rise with stop loss of 8980, while targets are 8550/8300″ 

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