The Nifty50 closed a volatile session moderately higher on December 30, but the outperformance in broader markets continued as the Nifty Midcap index was up 0.37 percent and Smallcap gained 0.6 percent.
The index recovered losses in late trade as intraday dip was bought and ended above 12,250, and formed Hanging Man pattern on daily charts which suggests exhaustion of the momentum.
Hence, experts feel 12,213, the lowest point of the day, would remain critical for the index to retain optimistic outlook in coming sessions.
A Hanging Man is a bearish reversal candlestick pattern which is usually formed at the end of an uptrend or at the top (more than 400-point rally from its recent low of 11,856 recorded on December 10). In a perfect 'Hanging Man' pattern either there will be a small upper shadow or no upper shadow at all, a small body and long lower shadow.
The Nifty50 opened higher at 12,274.90 and hit an intraday high of 12,286.45, but wiped out all gains in late morning deals to touch a day's low of 12,213.80. However, the index recouped losses in late trade and settled 10.10 points higher at 12,255.90.
"It remains critical for the index to sustain above 12,213 levels to retain optimistic outlook as breach of this level can induce some selling pressure which may eventually lead to the breach of recent corrective swing low placed around 12,118 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
Contrary to this if bulls manages to push the index beyond 12,293 levels then the said index can head into the critical resistance point placed around 12,350 levels, he said.
"As upsides from current levels are looking limited, we advise traders to remain neutral on long side but meanwhile they can shift their focus towards stock specific opportunities," he added.
On January 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 12,700 strike.
Call writing was seen at 12,700 and 12,500 strike while Put writing was seen at 11,900 then 12,100 strike. Option data suggests a wider trading range for Nifty at 11,900 to 12,500 levels.
India VIX moved up by 4.63 percent to 11 levels.
Nifty Bank hit a record high of 32,613.10, but saw selling pressure in late morning deals and finally settled at 32,354.90, down 0.18 percent. The index formed bearish candle on daily charts.
"Till the time, banking index sustains above 32,000 mark, we may see an upmove towards 32,750–33,000 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Rohit Singre, Senior Technical Analyst at LKP Securities sees support for index near 32,250-32,100 levels.