The Nifty50 ended December 24 session near its intraday low as selling pressure pulled benchmark indices to deep waters ahead of F&O expiry.
The price behaviour of last five trading session has resulted in a round top formation on the daily line chart, experts say.
"In the next trading session if Nifty closes below 12,200 levels then it shall trigger a short term downswing and correction shall get accelerated with initial targets placed around 12k levels. However, owing to expiry related factors market may remain volatile in the next session and strength in the index shall not be expected unless it closes above 12,300 levels," said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in
"For the time being it looks prudent on the part of traders to remain neutral on the long side and traders are advised to go short below 12,200 levels on a closing basis," he added.
India VIX fell down by 2.80 percent at 11.62 levels.
On the monthly options front, maximum Put OI is at 12,200 followed by 12,000 strike, while maximum Call OI is at 12,300 followed by 12,250 strike. We witnessed Call writing in 12,250 and 12,300 strike while Put unwinding is seen at the immediate strike price.
Options data suggests a trading range in between 12,150 to 12,300 zones on its monthly expiry day.
"Overall medium-term trend is still intact to positive and now the index has to hold 12,158 zones to witness an up move towards 12,300 then 12,350-12,400 zones while on the downside major support exists at psychological 12,000 zones," said Chandan Taparia, Vice President-Analyst-Derivatives at Motilal Oswal Financial Services Limited.
Bank Nifty formed a small body candle on the daily scale, indicating indecisiveness among the market participants. However, it is sustaining well above its consolidation breakout level on the weekly chart, which is a positive sign for the index.
"Going forward, strong support for banking index remains intact at 32,000 mark and till the time it sustains above the same, we maintain our positive stance for an up move towards 32,500 then 32,750 levels," he added.