The Nifty50, barring initial volatility, remained strong for the rest of the day and ended at record closing high on February 3, continuing Budget-driven uptrend for third straight session.
Banking & financials, auto, metals, IT and Pharma led the rally. The broader markets also joined the bull run with the Nifty Midcap and Smallcap 100 indices rising over 1 percent each.
The index formed candle which resembles Hanging Man kind of pattern on the daily charts, and continued its higher highs - higher lows formation of the last three sessions.
A Hanging Man is a bearish reversal candlestick pattern which is usually formed at the end of an uptrend or at the top (8.5 percent rally from its recent low of 13,634 recorded on February 29). 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.
Experts feel the pattern indicates some consolidation or trend reversal in the coming sessions, but in case of uptrend, the upside seems to be capped around 15,000 mark.
Mazhar Mohammad of Chartviewindia.in advised traders not to create fresh long side exposure and remain neutral.
India VIX rose by 1.74 percent from 23.34 to 23.74 levels.
The Nifty50 opened higher at 14,790 and hit an intraday low of 14,574.15, but after that initial volatility, the bulls gained control over Dalal Street and the index hit a record high of 14,868.85 before signing off the session at 14,790, up 142.10 points or 0.97 percent.
"Albeit Nifty50 continued its surge with new life time highs, it registered a Hanging Man kind of formation which may be hinting that rally is nearing its peak for the near term," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
"Interestingly, despite this kind of sharp upmove withessed from the lows of 13,596 levels to a high of 14,868, momentum oscillatots are completely presenting a different picture as Daily MACD is still remained on sell mode where as RSI continued with lower tops while some other leading momentum indicators reaching overbought zones," he said.
Hence, things look ripe for the market, from current levels, either for correction or consolidation in next couple of trading sessions, he feels.
Though weakness in this regard will be confirmed on a close below 14,574 levels, considering indicator set up, upsides may remain capped around 15,000 mark if bulls manages to push the index beyond 14,869 levels in next session, he said.
The option data indicated that the Nifty could see a wider trading range of 14,400 to 15,200 levels in coming sessions.
On option front, maximum Put open interest was seen at 14,000 followed by 13,500 strike while maximum Call open interest was at 15,000 followed by 16,000 strike. The noticeable Put writing was seen at 14,000 and 14,500 strikes while some Call writing was visible at 16,000 and 15,500 strikes, followed by unwinding in 14,500 strike.
Bank Nifty opened gap up at 34,555.60 and continued its northward journey to hit a record high of 34,908.05 levels. The index closed with gains of 490.50 points or 1.43 percent at 34,758.40 and formed a bullish candle on daily scale with longer lower shadow indicating bulls are in full form.
"The index is forming higher top - higher bottom from the last four sessions. Now it has to hold 34,500 to witness an upmove towards 35,000 and 35,500 levels, while on the downside support seen at 34,000 and then 33,500 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Positive setup was seen in Shriram Transport Finance, PFC, Cholamandalam Investment, Bharat Electronics, Escorts, TVS Motor, IOC, Cipla, Bank of Baroda, Sun Pharma, Hero MotoCorp, M&M, Axis Bank, LIC Housing Finance and Bharti Airtel while weakness was seen in Marico, Sun TV Network, Pidilite Industries, Maruti Suzuki and Colgate Palmolive, he added.