An evening star which is a very bearish three day candle pattern has occured on the Nifty .
The characteristics of the pattern are,
- Existence of an uptrend
- The first bar is a large white candlestick
- The middle bar is a small-bodied candle (red or white) that closes above the first white bar.
- The last bar is a large red candle.
- The pattern is more successful if the third candle covers at least 70% of the first candle
In the case of the Nifty, all characteristics have been fulfilled. Also, the third candle has closed below the low of the first bar increasing the possibility of success of the pattern .
The overbought conditions on oscillators and the negative divergence since quite some time add proof and confirm the bearishness of the evening star.
Half Hourly Chart
The fall has retraced more than 50% of rise from 4904. The breakout level of 5036 is also taken out. 61.8% fibo level is at 4983. A break of this will take it to 4904. Break of 4904 will give more confirmation to the bearishness of the evenng star .
The final blow will be if the uptrendline from March lows is broken. Support on this trendline is at 4880.
Till the high of 5110 is taken out or we have some other confirmation for getting bullish, avoid longs. I would be neutral and go short only after a decisive break of the uptrendline from March lows.
Happy Trading !!