Trade setup for Aug 20: GIFT NIFTY indicates a gap up opening on Thursday, will it sustain?

GIFT NIFTY futures traded 148 points higher on Thursday morning, indicating a gap-up opening for NIFTY50. The cooling of US Treasury yields and the dollar index will continue to influence investor sentiment for today’s trading session.

Meanwhile, the US stock markets closed mixed on Wednesday after the Treasury Department announced a buyback of long-dated Treasury notes, cooling off the yields. The Dow Jones and S&P 500 closed in the green with 0.2% gains, while the NASDAQ 100 closed in the red.

The Asian markets posted a sharp recovery on Thursday morning, recouping the majority of the losses. The KOSPI index soared over 5.8% on Thursday, followed by the Japanese Nikkei at 1% and Hong Kong’s Hang Seng at 0.5%.

Crude oil prices hovered near $91 per barrel, surging 3% this week. The Middle East uncertainties continue to hold ground, alleviating fears of higher-for-longer crude oil prices.

NIFTY50 chart summary

The NIFTY50 continued its downward journey on Wednesday, shedding 76 points as the benchmark extended its losing streak to seven sessions. Notably, the index settled beneath the 20 and 50 EMAs on the hourly timeframe for the seventh day running, highlighting that bears are tightening their grip.

Daily charts reveal that the index continues to struggle below the vital 200 EMA threshold, signalling a deterioration in the long-term trend and fading momentum. While the benchmark has effectively filled the gap from July 29, raising hopes of a minor recovery, a decisive close above the 24,400 mark remains critical. Only when the index sustains above this 200 EMA level would it trigger a reversal in sentiment.

NIFTY50 open interest summary

The open interest data for coming weekly expiry suggests 24,500 as the strong resistance level, with the highest open interest on the call side. On the downside, 24,000 puts hold the highest open interest, suggesting strong support for the NIFTY50.