Trade setup for May 25: Can NIFTY50 reclaim 20-day EMA on Monday?

Indian benchmark indices are expected to open higher on Monday morning, owing to positive global market cues and cooling off geopolitical tensions in the Middle East.

GIFT NIFTY futures jumped nearly 200 points on Monday morning, indicating a sharp gap-up opening for the NIFTY50. The US 10Y treasury yields cooled off below 4.7% and the dollar index fell below 99, suggesting an easing of pressure on the rupee on Monday.

Brent crude oil prices plunged over 7% on Monday morning to near $96 per barrel after reports indicated that a proposed deal with Iran could end hostilities. The reports also said the deal would lead to reopening of the Strait of Hormuz and curbing Iran’s nuclear program. However, President Trump stated that the US blockade will remain in place until a formal deal is reached and signed.

The US markets closed the previous week at record high levels, led by strong buying interest in semiconductor and tech stocks. The Dow Jones led the US market rally by ending 2.1% higher, while the S&P 500 and NASDAQ closed nearly 1% up for the week.

The Asian markets cheered the de-escalation in the Middle East crisis as they opened in the green across the board. The Japanese Nikkei opened 3% higher, followed by Hang Seng at 1% and the Korean Kospi at 0.4%.

NIFTY50

Last week, the NIFTY50 closed in the green with minor gains, bouncing back from weekly low levels. The index managed to close above hourly 20 and 50 EMA levels of 23,712 and 23,706, which indicates a bullish trading structure for Monday. However, the index failed to close above 23,850, which continues to remain a crucial resistance for the index. On the daily charts, the index faced the resistance of 20-day EMA of 23,794. A closing above these levels could provide much-needed bullish momentum to the index.

NIFTY50 OI Analysis

The options data for current weekly expiry indicates 23,500 as a crucial support with 23,500 puts holding the highest open interest. On the other hand, 24,000 calls hold the highest open interest, indicating a strong resistance for the index.