Trade setup for May 20: Can NIFTY50 break out of consolidation range on Wednesday?

The Indian benchmark indices are expected to remain under pressure on Wednesday amid weak global market cues. Global Treasury yields rose across the board again, signalling a risk-off environment amid renewed tensions in the Middle East.

The US markets closed in red across the board ahead of NVIDIA’s earnings release. Investors preferred to remain on the sidelines before the results and assess the trend for semiconductor demand in the AI boom. The Dow Jones, S&P 500, and NASDAQ closed 0.6% lower.

Taking cues from overnight losses in the US markets and rising bond yields, the Asian markets too witnessed a weak opening on Monday. The Japanese indices fell by over 1000 points or 1.7% lower, while the Korean and Hong Kong benchmark indices dropped 0.7%.

Brent crude oil prices hovered near $111 per barrel as Trump issued a fresh threat to Iran. The US President said Washington could act within two to three days if Tehran failed to accept US peace terms.

The GIFT NIFTY futures fell over 100 points on Wednesday morning, suggesting a weak start for NIFTY50. The index continues to remain under pressure owing to rising bond yields and depreciating currency.

NIFTY50

The chart structure for NIFTY50 remains the same as the index closed flat with minor losses on the weekly expiry day. The intraday volatility remained high as the index made an intraday high of 23,782, near the 20 EMA. However, it failed to close above it as selling pressure near 23,800 pulled the indices lower to 23,600 levels. The chart structure continues to remain the same for Wednesday, with 23,800 as resistance and 23,400-23,300 as the support zone.

NIFTY50 OI analysis

The initial buildup for the coming weekly expiry on May 26 indicates a wide range of trades. The 24,000 calls hold the highest open interest, indicating a strong resistance. On the flipside, 23,000 puts hold the highest open interest, indicating a strong support for the NIFTY50.