Trade setup for July 22: Can NIFTY50 defend 20 EMA on Wednesday?

GIFT NIFTY futures were trading more than 50 points lower at 7:30 am on Wednesday, indicating a negative start for the NIFTY50. Despite a constructive global backdrop, the spike in crude oil prices is expected to be a major drag on the market sentiment today.

Brent crude oil prices remained elevated near $92 per barrel on Wednesday morning as supply risks intensified across major routes in and around the Middle East. President Trump dismissed the likelihood of talks with Iran and warned of additional strikes.

US stock markets closed in the green across the board, led by a rally in chip stocks. The NASDAQ 100 soared over 550 points to close 1.9% higher, Dow Jones added 385 points and the S&P 500 rose 0.9%. Sandisk (+14%), Micron (+12%), Intel (+8%), AMD (+8%) and NVIDIA (+1.9%) were among the key movers.

Taking cues from the overnight gains in the US chip stocks, the Japanese and Korean markets extended their rally on Wednesday morning. The KOSPI soared 6%, and the Nikkei jumped 2%. Meanwhile, the Hang Seng fell 0.5%.

NIFTY50 charts

The NIFTY50 ended Tuesday’s session in the red, shedding 50 points after recovering from its intraday lows. On the hourly charts, the index managed to defend the 50 EMA level, but closed below the 20 EMA, suggesting a lack of buying strength in the closing hours.

Additionally, on the daily charts, the index made a doji candlestick pattern, indicating indecision on the direction of the market. Meanwhile, the index closed below the crucial support zone of 24,200, indicating a lack of buying strength at higher levels.

NIFTY50 open interest

The initial buildup for the upcoming weekly expiry on July 28 indicates a lack of clarity on the index's direction. The 24,200 calls and puts hold the highest open interest, indicating a range-bound trade for NIFTY50 on Wednesday.