Expiry trade setup: Will NIFTY50 hold the gains above 25,700 on Tuesday?

NIFTY50

Max call OI:26,000

Max put OI:25,500

(Ten strikes to ATM, 13 Jan expiry)

The NIFTY50 posted a sharp pullback from lower levels on Monday after comments from the US Ambassador to India, on India and the US’s trade relationship, boosted the market sentiment. The NIFTY50 closed over 100 points higher at 25,790 levels, recouping from the intraday low levels of 25,480. The global market cues remain positive for Tuesday with key US indices hitting record high levels, digesting the worries of the Federal Reserve’s independence.

The GIFT NIFTY futures indicate a positive opening for Indian markets on Tuesday morning, owing to positive global cues. However, a fresh tariff announcement by the US President on Iran could sour the sentiment.

On the technical front, the NIFTY50 index posted a bullish hammer pattern, reversing sharply from the intraday lows. The index also bounced back above the crucial 20-SMA weekly support level of 25,657, indicating a reversal from the bearish momentum. Experts believe, index should close above the 25,700 levels on a weekly basis to regain the momentum.

On the options data front, the 25,500 puts witnessed heavy open interest addition, indicating a strong support for today’s expiry, while 26,000 calls continued to hold the highest open interest on the upside, indicating a strong resistance.

Expiry outlook

Bullish outlook: Traders with bullish sentiment can execute a long call strategy by buying 25,700 calls. The strategy would turn profitable after the index moves above 25,833.

Bearish outlook: Traders with a bearish outlook can execute a long put strategy by buying a put strike of 25,800. The strategy would turn profitable after the index moves below the 25,740 level.

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