Trade setup for Aug 26: GIFT NIFTY futures indicate gap up opening on Wednesday, will it sustain?

GIFT NIFTY futures rose over 200 points on Wednesday morning, suggesting a gap up opening for NIFTY50. Sharp fall in crude oil prices and cooled of US treasury yields will be key sentiment driver for todays trading session.

The crude oil futures extended the fall on Wednesday morning, following a 5% drop on Tuesday. The Brend crude oil futures traded 1% lower near $85 per barrel and the WTI crude oil prices touched $80 per barrel mark on Wednesday morning.

The US stock markets closed in green with moderate gains across the board ahead of the crucial PCE inflation data, scheduled to be release later today. The Dow Jones extended its rally for third consecutive session, rising over 160 points. Meanwhile, tech stocks pulled NASDAQ 100 higher by 0.6% and the S&P 500 by 0.3% on Tuesday.

The Asian markets opened positive on Wednesday morning, with little gains. The KOSPI index rose 0.45%, followed by 0.1% gains in Nikkei. The Hong Kong index rose the most amongst Asian pack with 0.9% gains.

NIFTY50 Chart Summary

NIFTY50 posted a smart recovery from lower levels on the monthly expiry day, closing 115 points higher. The rally pulled the index above the hourly 20 and 50 EMAs, reversing the short-term momentum to positive. Moreover, the hourly charts indicate a bullish crossover, with the 20 EMA crossing the 50 EMA from below, further strengthening momentum.

On the daily charts, the index posted a strong bullish engulfing candlestick pattern, suggesting a strong reversal in the medium-term trend. However, a sustained close above the 200 EMA at 24,393 would revive bullish momentum in the long term, giving hope to bulls of regaining control. Until then, 24,400 resistance remains a major hurdle for NIFTY50, with 24,115 as crucial support.

NIFTY50 open interest summary

The initial buildup for coming weekly expiry on September 1 suggests that, 24,200 will remain a crucial support for the NIFTY50, with the highest open interest on the put side. Similarly, 24,500 calls hold the highest open interest, indicating near-term hurdle for NIFTY50. Meanwhile, 24,000 to 24,300 puts witnesses strong open interest addition, indicating strong downside protection.