Trade Setup for Oct 1: BANK NIFTY confirms bearish engulfing pattern, all eyes on 20 DMA

Asian markets update

The GIFT NIFTY is trading flat, indicating a subdued start for the Indian equities today. Meanwhile, the Asian markets are trading firmly in green. Japan’s Nikkei 225 is up nearly 2%, while the Hong Kong’s Hang Seng index is up over 2%.

U.S. market update

Dow Jones: 42,330 (▲0.0%) S&P 500: 5,762 (▲0.4%) Nasdaq Composite: 18,189 (▲0.3%)

U.S. stocks ended the Monday’s session on a positive note with Dow Jones and S&P 500 ending the day at record high closing. This comes after the U.S. Fed Chair Jerome Powell in his speech said that the central bank is not in a hurry to cut rates quickly. The Fed chair said that if the economy performs as expected, that would mean two more rate cuts this year, a total of 50 basis points.

NIFTY50

October Futures: 25,990 (▼1.3%) Open Interest: 5,96,095 (▼8.4%)

The NIFTY50 index started Monday’s session on a negative note and fell over 350 points, forming a large bearish candle on the daily chart. The index slipped below the crucial support of 26,000, without meaningful intraday retractements and ended the session near the day’s low.

The technical structure of NIFTY50 index on daily chart looks weak with the formation of large bearish candle. The weakness could extend to the 20-day moving average, its immediate support at 24,500, if the index follows through and forms a negative candle. Meanwhile, the recent all-time high of 26,277 will act as immediate resistance for the index.

The open interest build-up for 3 October expiry saw significant changes and turned in favour of bears. The significant call base can be seen at 26,000 and 26,200 strikes, making them as immediate resistance. Conversely, the put base was seen at 25,000 strike, hinting at support for the index around this zone.

BANK NIFTY

October Futures:53,435 (▼1.4%) Open Interest: 1,19,186 (▼2.3%)

The BANK NIFTY index fell over 1.5% on Monday and witnessed the selling pressure for the second day in a row, confirming the bearish engulfing pattern formed on 27 September. It is a two-candle formation where a smaller bullish candle is followed by a larger bearish candle, completely erasing the previous day's gains, indicating weakness.

In our yesterday’s blog, we highlighted to our readers about the formation of the bearish engulfing pattern on BANK NIFTY, pending confirmation. The index confirmed the bearish pattern and ended the Monday’s session below the low of the reversal pattern, indicating weakness.

As shown in the chart below, the immediate support for the index is around its 20-day moving average, around 52,500 and the crucial support is around 51,750 zone. On the other the hand, the previous all-time high zone of 54,000 will now act as immediate resistance in the near-term.

The open interest data for today’s expiry has significant call base at 53,500 and 53,000 strikes, indicating that index may face resistance around these strikes. On the flip side, the put base was seen at 52,500 and 52,000 strike, hinting at support for the index around these levels.

FII-DII activity

Stock scanner

Long build-up: Nil

Short build-up: Reliance Industries, Indian Hotels, Hero Motocorp, TVS Motor and Trent

Under F&O ban: Balrampur Chini Mills, Bandhan Bank, Hindustan Copper and RBL Bank

In Futures and Options or F&O, long build-up means an increase in Open Interest (OI) along with an increase in price, and short build-up means an increase in Open Interest(OI) along with a decrease in price.

Source: Upstox and NSE.

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