After showing an excellent upmove in the last four sessions, Nifty encountered profit booking on Thursday and closed the day lower by 179 points amidst high volatility. After opening with downside gap of 157 points, the market slipped into further weakness in the early part of the session. It later showed high volatility by the way of intraday up and down swings in the mid to later part of the session. The opening downside gap remains unfilled.
A small negative candle was formed on the daily chart with upper and lower shadow. Technically this pattern indicate minor trend reversal on the downside with high volatility. This action in the underlying considered as a high wave type candle formation. Normally, high waves after an upmove or down move could indicate trend reversal post confirmation. Hence, there is a hopes for bulls to make a comeback from the lows.
After a display of strong upside momentum and the negation of bearish chart pattern of lower tops and bottoms on the daily chart recently, the Nifty seems to have unfolded a bullish pattern of smaller degree higher highs and lows as per daily timeframe chart. As per this pattern we are not expecting any sharp decline from here and the buying is expected to emerge from the lower levels post minor dip in the market.
Conclusion: Four sessions of bull run has been halted on Thursday with sizable downward correction. The chances of sharp downward reversal as we had seen in the past is ruled out in the short term. One may expect minor weakness or consolidation type movement with high volatility in the next couple of sessions before showing upside bounce from the lows. Important lower supports to be watched around 17600-17550 levels.