F&O Stock Makes ‘Shooting Star’ Amid 8% Rally; Poised for Correction!

  • Stock Market Analysis
  • Editors Pick

Despite the weak broader market sentiments, the share price of Interglobe Aviation Ltd (NS: INGL ) is on a roll. The stock opened with a massive gap up and surged to the day’s high of INR 2,236.95 which is its new 52-week high, delivering a peak intraday return of 8.2%. The volume on today’s move is also quite high, at 3.54 million shares, by 1:39 PM IST. This is the highest 1-day volume since 16 February 2023.

The two reasons for such a strong gap-up opening are - a 4% cut in the crude oil price the previous day and the bankruptcy filing of Go First Airlines. Both these factors are positive for all the remaining players in the Indian Aviation industry.

Image Description: Daily chart of Interglobe Aviation shares with volume bars at the bottom

Image Source: Investing.com

As the stock has been rallying for the last few days and today crossed its 52-week high, the trend is clearly on the positive side. In fact, any stock, that breached its year’s high is a strong candidate for a bull run. However, for the short term, shares of Indigo have become overbought. The RSI (daily, 14) is currently showing a reading of 82.9 which is significantly above the benchmark overbought reading of 70.

This high reading is not giving comfort to go long on this counter despite a clear uptrend. On the contrary, short-term aggressive traders can also look for a short opportunity as the probability of mean reversion is high. The RSI is generally used for such mean reversion trades and when the reading falls back below 70 (from a higher value), the sell signal is generated.

Another reason for the short-term correction is the formation of a shooting star candlestick pattern on the daily chart. This pattern forms after a strong uptrend and marks a reversal towards the south. In it, the stock marks a gap-up opening, rises to a good high for the day but eventually falls back to around the opening price before the end of the day. This price action leaves a long wick on the upside with a small real body at the bottom end, making it look like an actual star falling from the sky.

As per this pattern, as soon as the stock breaks the low of the shooting star in the next trading session, the sell signal gets confirmation. As there is a gap till INR 2,088 left on the chart, this could be taken as the target for the short trade. As soon as the stock fills the gap, short trade should be booked because the broader trend direction is strongly up, and this is just a short-term correction.

Read More: Portfolio: 3 ‘Cheapest’ Public Banks on NSE!

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  • Rajesh Pahuja @Rajesh Pahuja
    Too risky to short in the ongoing bull run in market
    Like 0
  • Shaktiraj Herma @Shaktiraj Herma
    hold in selling side plan
    Like 0
  • Mihir Katakiya @Mihir Katakiya
    advisor ho aap?
    Like 0
    • Aayush Khanna @Aayush Khanna
      Nope.
      Like 0
    • Johnathan White @Johnathan White
      Appreciate your efforts. But similar shooting star and a confirmation with negative closing is seen at IOC(Indian oil corporation). Your thoughts on that
      Like 1
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