Trade setup for Oct 14: Can NIFTY50 defend the gains above 22,700?

Shrugging off the global positives, the GIFT NIFTY futures fell nearly 90 points on Wednesday morning, indicating a gap-down open for the Indian markets. Elevated crude oil prices could act as a sentiment dampener for Indian markets on Wednesday.

Brent crude oil futures jumped over $107 per barrel on Wednesday, as renewed escalations in the Middle East region resurfaced supply disruption concerns. Intensifying friction between the Houthi rebels from Yemen and Saudi Arabia poses a threat to regional trade safety, adding a premium to crude oil prices.

US stock markets erased early gains to close in the red; the NASDAQ 100 fell 0.6%, while the S&P 500 and Dow Jones fell 0.4% on Tuesday. Selloff in tech and chipmaker companies pulled the benchmark indices lower as reports indicated China’s CXMT could pose a threat to US and Korea’s memory chip makers.

The Asian markets staged a strong comeback after Tuesday’s slump. The Korean KOSPI surged 1% on Wednesday as investors reassessed the risks in chipmakers like SK Hynix and Samsung amid the resurgence of Chinese competition in the sector. The Taiwan weighted index and Japan’s Nikkei surged as much as 0.8% on Wednesday morning.

NIFTY50 chart check

NIFTY50 staged a smart bounce back from the previous day’s low amid the final-hour boost. However, the index posted a sharp rally in the early hours and defended it throughout the day, indicating sustained buying momentum on Tuesday. In addition, the index also crossed 20 and 50 EMA on the hourly charts and pointed towards a potential positive crossover, indicating a reversal from bearish momentum to bullish.

On the daily charts, the index closed above a crucial resistance level of 22,700, indicating renewed buying strength at lower levels. The index crossed the 10-DMA level of 22,630 for the first time in nearly a month. Going forward, the benchmark index may find its support near 22,300 levels and next resistance at the 20- DMA level of 22,875.

NIFTY50 open interest summary

The open interest data for the upcoming weekly expiry indicates strong open interest addition on the put side after Tuesday’s strong bounce back. The 22,500 puts for the 19th October expiry added nearly 60 lakh contracts, indicating strong support on the downside. On the other hand, 23,000 calls also held the highest open interest on the upside, indicating strong resistance for the index.