Trade setup for May 12: Can NIFTY50 defend 23,800 and bounce back above 24,100 on expiry day?

The benchmark indices are expected to open lower again on Tuesday amid weak global cues. GIFT NIFTY futures traded over 180 points lower on Tuesday morning, taking cues from weak Asian markets and increased commodity prices.

Asian markets traded mixed, with Japanese markets holding ground near record levels and trading flat-to-negative on Tuesday morning. Meanwhile, Korean markets witnessed heavy profit booking after an explosive rally. The KOSPI plunged over 3% on Tuesday morning as investors preferred taking some money off the table.

Brent crude oil prices steadied near $105 per barrel amid weak newsflow from the Middle East. Investor worries increased as oil supply remains under stress over the effective closure of the Strait of Hormuz.

US markets continued their record run with a cautious outlook as investor anxiety increased over renewed escalations in the Middle East. The Dow Jones, S&P 500, and NASDAQ closed almost 0.2% higher on Monday as tech stocks continued to lift markets.

NIFTY50 chart check

The NIFTY50 index closed 360 points lower on Monday after trading in a narrow range of 24,000 to 24,500 for 11 consecutive trading days. The index broke the psychological support level of 24,000 and closed below the 20 EMA after defending it for 20 trading days. As highlighted in the previous newsletter, the 20 EMA level was crucial support for the index in the near term, and a close below it indicates a grip of bearish sentiment on the index. However, a closing above 24,100 could negate the bearish setup and come back in the trading range.

NIFTY50 OI analysis

The open interest buildup for today's expiry suggest strong resistance at 24,000 level. On the flipside, 23,500 puts hold the highest open interest, indicating a strong support. However if the index crosses 24,000 during the session, we may see some short covering above those levels.