The Nifty50 remained positive for most of the session and closed at a record high on January 4, boosted by the Indian drug regulator's emergency use nod to two COVID-19 vaccines and on positive global cues. Auto, technology, metals and pharma stocks led the rally.
After starting the day higher at 14,104.35, the Nifty turned volatile to hit an intraday low of 13,953.75 in the morning. The index immediately recouped losses and gains to hit the day high of 14,147.95. It closed at 14,132.90, rising 114.40 points.
It formed a small bullish candle with a long lower shadow, which resembled the Hanging Man pattern on the daily charts, indicating that bulls were dominating and every small decline was being bought.
A Hanging Man is a bearish reversal candlestick pattern usually formed at the end of an uptrend or at the top (around 804-point rally from its recent low of 13,328 recorded on December 21). 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 current momentum can take the Nifty towards 14,300 but selling pressure will be seen if the index breaks 13,950, experts said.
As the momentum strongly favours the bulls, traders with a high-risk appetite should look to intraday dips with a stop below 13,950 for a target of 14,270, Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
"As the price chart is looking extremely bullish, a weakness in the Nifty shall not be expected unless it breaches the critical short-term support present at around 13,950 levels on a closing basis," Mohammad said.
If the bulls manage to push the index beyond 14,148, then the rally shall initially extend towards 14,280 levels. If the Nifty breaches 13,950 on a closing basis, then it can trigger a downswing, offering an opportunity to trade on the short side, he said.
On the options front, maximum Put open interest was seen at 13,000 followed by 13,500 strike, while maximum Call open interest was at 14,000 followed by 14,500 strike. Options data indicates that the index can see a wide trading range of 13,700-14,500 levels, while the immediate range could be 13,900 to 14,300.
India VIX was up by 2.40 percent from 19.56 to 20.03. "Volatility needs to sustain below 20 zone to support the bullish market setup and fuel the bulls with a higher market base," said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
The Bank Nifty opened positive at 31,485.15 but failed to surpass immediate hurdle of 31,500 and corrected in the initial hour of the trade to hit an intraday low of 30,893.65.
The banking index underperformed the Nifty and remained sideways unlike the broader market and closed flat, down 13.30 points at 31,212.50. It formed a Bearish Belt Hold candle on the daily scale that indicates hurdles at higher zones.
"Now the Bank Nifty has to continue to hold above 31,000 to witness an upmove towards 31,500 and 31,750, while on the downside, support is seen at 30,800 and 30,500 levels," Taparia said.
A positive setup was seen in Tata Steel, PVR, Hindalco, Cholamandalam Investment, SAIL, NMDC, Ashok Leyland, Cummins India, Amara Raja Batteries, Aurobindo Pharma, TCS, Bharat Electronics, Eicher Motors, GAIL, JSW Steel, Federal Bank, M&M Financial, HCL Technologies, Grasim, Muthoot Finance and Lupin, while weakness was seen in Hero MotoCorp, Power Grid and NTPC, he added.