Trade setup for Oct 16: Can NIFTY50 reclaim 23,000 on Friday?

Indian benchmark indices are expected to open on a positive note on Friday, heading for weekly gains. GIFT NIFTY futures jumped 94 points on Friday morning, indicating a gap-up open for NIFTY50.

Brent crude oil prices head for a third weekly gain on Friday after steadying near the $105 per barrel mark amid mounting concerns in the Middle East region. An attack on the Singapore-based vessel near the Strait of Hormuz, further aggravated the situation in the region, adding supply disruption concerns.

The US stock markets staged a smart recovery from lower levels on Thursday as selloff in the tech stocks eased after bond yields cooled off. The NASDAQ 100 closed almost flat after opening over 1.4% lower, while the Dow Jones surged over 500 points as investors increased bets on defensive stocks.

Asian markets rebounded from the three-month lows on Friday, amid easing pressure on the tech selloff. The Korean KOSPI bounced back 3%, followed by Japanese Nikkei at 1.8%, Hong Kong’s Hang Seng at 1% on Friday morning.

NIFTY50 chart check

NIFTY50 bounced back sharply over 370 points on Thursday, shrugging off the global market worries. The index on the hourly chart showed a positive crossover of the 20 EMA crossing the 50 EMA from below. Subsequently, the index also sustained above both the moving averages for two consecutive days, implying sustained positive momentum.

The price action on the daily charts suggests the index crossed the daily 20 EMA for the first time in more than a two-month period, indicating renewed momentum for the near-term. Going forward, a sustained weekly close above the 200 EMA would help limit the bearish momentum and revive bullish momentum in the index.

NIFTY50 open interest summary

After Thursday's rally above 22,700, strong shortcovering pulled the index above 23,000, shifting the open interest to higher levels on the call side. Now the 23,500 calls hold the highest open interest, indicating a strong resistance for NIFTY50. Similarly, on the downside, the 22,500 held the highest open interest, indicating a strong support for NIFTY50.