Macrotech, Colgate among ‘shooting stars’ with bearish undertones

The Indian stock market indices have been trading above the previous resistance level for the last couple of weeks, suggesting they may be poised for another break out in the near term. However, opinion is split, and some analysts expect another correction to be in the horizon.

Those reading technical charts have various ways to gauge how a stock may perform. One such parameter is to look at ‘shooting stars’.

A shooting star is a bearish candlestick with a long upper shadow, little or no lower shadow, and a small real body near the low of the day. It appears after an uptrend. In other words, a shooting star is a type of candlestick that forms when a stock opens, advances significantly, but then closes the day near the open again.

For a candlestick to be considered a shooting star, the formation must appear during a price advance. Also, the distance between the highest price of the day and the opening price must be more than double as the shooting star's body. There should be little to no shadow below the real body.

If we use this filter for all stocks, we get a list of 22 companies whose shares may be up for a bearish reversal. Most of these are from the small and micro-cap pack.

Among the large cap stocks or stocks with market cap above Rs 20,000 crore, with a shooting star pattern are real estate developer Macrotech (previously Lodha) and multi-national personal care products maker Colgate-Palmolive.

There are four other stocks from the small and mid-cap pack with market cap ranging between $100 million and $1.25 billion. These include Deepak Fertilisers, Go Fashion, Welspun Enterprises and Panama Petrochem.

Lower down the order there are names like Tourism Finance Corp, Rane Brake Lining, Bajaj Steel, Indo National, Indrayani Biotech, Jocil, AMJ Land Holdings, Morarjee Textiles, Mysore Petro Chem, Sunrise Efficient, Elnet Technologies, Rajeshwari Cans, Mittal Life Style, Jet Infraventure, Bharat Bhushan Fin and K K Fincorp.