Trade setup for Aug 12: Can NIFTY50 defend 24,400 support on Wednesday?

The GIFT NIFTY futures rose over 40 points on Wednesday morning, indicating a positive start for NIFTY50. The volatility in the crude oil prices and US Treasury yields are likely to dominate the investor sentiment on Wednesday.

Crude oil prices rose for a fifth straight session on Tuesday following mixed developments in the Middle East. Brent crude futures hovered near $89 per barrel on Wednesday morning, after briefly touching $90 during Tuesday's trade.

US markets ended lower as a rebound in crude oil prices weighed on sentiment. All three major indices, the NASDAQ 100, S&P 500, and Dow Jones, slipped 0.3% on Tuesday as investors turned cautious ahead of the vital inflation data release scheduled for Wednesday.

Optimism returned to Asian markets on Wednesday morning, led by gains in semiconductor stocks in Japan and Korea. The KOSPI and Nikkei rallied 3% and 0.4%, respectively, in early trade.

NIFTY50 chart summary

The NIFTY50 broke out of the consolidation range and closed over 110 points lower on Tuesday. As highlighted previously, the index closed below the swing low trendline, breaking out of the symmetrical triangle pattern, indicating a bearish reversal. In addition, the index also closed below 20 and 50 EMA levels on the hourly charts, turning the momentum bearish.

On the daily charts, the index managed to defend the 200 EMA support at 24,400, hitting an intraday low of 24,429 on Tuesday. Going forward, the index continues to hold strong support near 24,400; a breakdown below this key level could intensify bearish sentiment in the medium term.

NIFTY50 open interest buildup

The initial open interest buildup for NIFTY50 suggests that 24,000 puts hold the highest open interest on the downside, indicating the near-term support below 24,400. On the upside, 25,000 calls hold the highest open interest, suggesting strong resistance for the near term.