Trade setup for Nov 5: NIFTY50 reclaims 200 EMA levels, can it sustain above it on Thursday?

Indian benchmark indices are expected to open with a big gap up on Thursday after a sharp plunge in crude oil prices overnight, improving sentiment for Indian markets. The GIFT NIFTY futures surged over 370 points on Thursday morning, indicating a gap-up open for NIFTY50.

Brent crude oil prices suffered a major loss on Wednesday, plunging over 9% to near $93 per barrel after Democrats swept midterm elections in both chambers. The staggering defeat is expected to put pressure on President Trump's decision-making on the war front.

The US stock markets staged a sharp recovery on Wednesday after the election uncertainty ended with Democrats sweeping both houses. The NASDAQ 100 closed 0.9% higher, the lowest among the three benchmark indices, while the S&P 500 surged 1.6% and the Dow Jones soared over 1500 points.

The overnight selloff in the tech stocks in the US worsened the sentiment for chip stocks in Asia on Thursday morning. The Korean KOSPI fell over 4%, followed by Taiwan’s weighted average index at -2% and Japan’s Nikkei at -0.4%.

NIFTY50 chart check

NIFTY50 surged 0.6% on Wednesday, extending its rally for the fifth consecutive session. The index continued its bullish momentum throughout the intraday session, indicating sustained buying strength at higher levels as well. The buying strength has helped the index sustain above the 20 and 50 EMAs for four consecutive sessions.

On the daily charts, the index managed to close above the 200 EMA level of 23,900, indicating a major reversal from the broader bearish trend to bullish on the long-term charts. However, caution persists after a 1200 point non-stop rally in merely five sessions. Going forward, 24,000 to 24,200 remains the key resistance zone, while the previous breakout zone between 23,200 and 23,400 remains a crucial support zone for the index.

NIFTY50 open interest summary

The open interest data for the coming weekly expiry on Monday, November 9 indicates that the upside now has hurdles at 24,000 and 24,500 levels, with the highest open interest on the call side for this expiry. Similarly, the downside support levels now stand at 23,500, with the highest open interest on the put side at the respective levels.