The Nifty remained high for the most part of the session amid volatility and saw record closing for the second straight day on November 28, backed by banks, technology and index heavyweight Reliance Industries that hit Rs 10 lakh crore in market capitalisation.
The index closed above 12,150 levels on the day of the expiry of November derivative contracts after trading in a narrow range of 58 points. It formed a small bullish candle -- as closing was higher than opening tick—that resembles a Hanging Man formation on the daily charts.
A Hanging Man is a bearish reversal candlestick pattern that is usually formed at the end of an uptrend or at the top (more than 300-point rally from its recent low of 11,840 recorded on November 13).
In a perfect Hanging Man pattern, there is either a small upper shadow or no upper shadow at all, a small body and a long lower shadow.
Experts feel as the index moved near its trendline resistance, there could be some profit booking in the coming days, but the overall trend will remain positive in the medium to long term.
After opening higher at 12,132.10, the Nifty touched an intraday high 12,158.80 (also the intraday all-time high) and day's low of 12,099.95. After consolidation, the index gained some strength in late trade and closed 50.50 points higher at 12,151.20. It gained 2.3 percent in November series.
"Although the Nifty is moving higher, some of the momentum oscillators are developing lower tops, suggesting the formation of potential negative divergences going forward. Besides, there seems to be a trendline resistance around 12,183 levels on daily charts drawn from the highs of 11,694 levels registered on September 23. Hence, based on this technical evidence, it looks some sort of retreat is inevitable for the bulls going forward," Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.
He said in that scenario, the Nifty can test its critical support on short-term charts, which is placed around 11,990 levels. However, for reversal of the short-term trend, the index needs to decisively close below 11,990, he said.
Mohammad advised traders to book profits in the next trading session and wait for some pull-back in the index before initiating fresh longs.
On December options front, maximum Put open interest was at 12,000 followed by 11,500 strike, while maximum Call open interest was at 12,500 followed by 12,000 strike.
Significant writing was seen in 12,000 and 12,100 Put options, while marginal Call writing was seen at 12,500, 12,600 and 12,100 strikes.
The Options data suggests a shift in the trading range between 11,900 to 12,300-12500 levels.
India VIX fell by 4.84 percent to 13.91 levels. "If VIX remains below 15 zone, then we may see a continuation in ongoing optimism in the coming days too," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, said.
In line with the benchmark indices, the Bank Nifty, too, opened with gains and registered a new all-time high of 32,157. The banking index continued its outperformance, closing 0.77 percent higher at 32,123 and formed a green body candle on the daily chart.
"It is making higher high for the seventh consecutive week, which clearly shows strength in the index. It is sustaining well above the horizontal trend line and the support is now inching higher towards 31,783 levels. On the upside, immediate resistance is placed at 32,500 and 32,800 levels," Taparia said.