Trade setup for 18 July: NIFTY50's second doji signals uncertainty, BANK NIFTY continues to consolidate

Asian markets update at 7 am

The GIFT NIFTY slipped 0.1%, indicating a flat-to-negative start for the Indian equities today. The negative handover from Wall Street has weighed on Asian markets. The Nikkei 225 is down nearly 2%, while Hong Kong’s Hang Seng index has slipped 0.3%.

U.S. market update

• Dow Jones: 41,198 (▲0.5%)
• S&P 500: 5,588 (▼1.3%)
• Nasdaq Composite: 17,996 (▼2.7%)

U.S. stocks had a mixed day on Wednesday, with the Nasdaq Composite suffering its worst drop in almost two years. This comes amid concerns over tighter technology export restrictions on China and Donald Trump's comments on Taiwan.

Technology stocks were hit hard as the Biden administration said it was considering tighter restrictions on companies still supplying advanced chip technology to China. Meanwhile, Republican presidential candidate Donald Trump questioned U.S. defence support for Taiwan in an interview. He suggested that Taiwan should pay for this protection, adding to market uncertainty. Despite these pressures, sector rotation was clearly visible, with the Dow Jones quietly setting a new record high.

NIFTY50

• July Futures: 24,644 (▲0.0%)
• Open Interest: 5,74,049 (▲0.5%)

The NIFTY50 started Tuesday's session on a positive note after a positive handover from Wall Street. The index hit a fresh all-time high and traded in a tight range with no follow-through momentum.

The index consolidated its gains around the 24,600 level and formed a second consecutive doji candlestick pattern, indicating investor indecision at record highs. Meanwhile, on a positional basis, the broader trend of the NIFTY50 index remains positive until it slips below the 24,400 level on a closing basis.

On the 15 min chart, the NIFTY50 has immediate support around 24,600, the low of 16 July. If the index falls below this level, we may see a decline towards the 24,500 zone. However, if the index manages to break above 24,650, then we may see a rally towards 24,800.

For today's expiry, the 24,700 and 24,800 call strikes saw significant call open interest. The index could face resistance around this area. Conversely, the open interest for put options is spread between the 24,500 and 24,300 levels, making it an immediate support zone for today's expiry. According to options data, traders expect the NIFTY50 to trade between 24,800 and 24,400 levels.

BANK NIFTY

• July Futures: 52,529 (▼0.1%)
• Open Interest: 1,38,978 (▼4.2%)

The BANK NIFTY index its consolidation for the eighth day in a row and ended the Tuesday’s session on a flat note. The index traded in a narrow-range of nearly 300 points on the weekly expiry of its options contract and formed an inside candle on the daily chart.

In yesterday's analysis, we pointed out that the index may remain sideways unless it breaks through the 52,800-52,000 range. The index protected its 20-day moving average for the fourth consecutive day, indicating support at lower levels. Traders should keep a close eye on this area in the coming sessions, as a break could indicate the next direction.

The initial open interest data for the 24 July expiry shows a significant call and put base at the 52,500 strike. However, with the upcoming results of HDFC Bank and Kotak Mahindra Bank on 20 July, traders should closely monitor any changes in the positioning of the open interest.

FII-DII activity

Stock scanner

Under F&O Ban: Balrampur Chini Mills,Chambal Fertilisers, GMR Infra, Gujarat Narmada Valley Fertilisers & Chemicals, Hindustan Copper, Piramal Enterprises, RBL Bank and Vedanta

Out of F&O Ban: Aditya Birla Fashion and Retail, India Cements and Indus Towers

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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