Expiry day trade setup: Can NIFTY50 hold the 22,500 support on monthly expiry?

NIFTY50

• Max call OI: 22,700
• Max put OI: 22,600
• PCR: 0.92 (5 strikes from ATM)

The NIFTY50 extended its negative momentum for the sixth consecutive day, ending the February 25 session flat. The index slipped closer to the key 22,500 support level, forming an inverted hammer candlestick pattern on the daily chart.

An inverted hammer is a bullish reversal candlestick pattern that appears after a downtrend, consisting of a small body and a long upper wick. However, the pattern is confirmed when the next candle closes above the high of the inverted hammer, signalling a potential trend reversal. On the flip side, a close below the inverted hammer invalidates the pattern.

Intraday range

On the 15-minute chart, the NIFTY50 index is currently trading near the immediate support zone of 22,500. This comes after the index broke its six-day consolidation and slipped below the support zone of 22,700-22,800, which will now act as immediate resistance.

Options build-up

The open interest (OI) data for the February 27th expiry saw significant call build-up at 22,700 strike, pointing at resistance for the index around this zone. On the other hand, the put base was observed at 22,600 and 22,500 strikes, suggesting support for the index around these levels. Additionally, 22,600 call and put options also witnessed significant OI build-up, indicating range-bound activity around this level.

Bullish outlook

Bearish outlook

Range-bound outlook

Conclusion

In simple terms, a long call strategy allows traders to take advantage of rising prices, while a long put takes advantage of falling prices. Options offer the flexibility to navigate different market conditions - bullish, bearish or range-bound. However, past performance isn't a guarantee of future results. Before implementing any strategy, it's important to assess the risks and have a clear plan for managing potential losses.

Disclaimer

Derivatives trading must be done only by traders who fully understand the risks associated with them and strictly apply risk mechanisms like stop-losses. The information is only for educational purposes. We do not recommend any particular stock, securities and strategies for trading. The stock names mentioned in this article are purely for showing how to do analysis. Take your own decision before investing.