Trade setup for Oct 22: Can NIFTY50 defend 22,700 breakout retest level on Thursday?

Indian benchmark indices are expected to open on a negative note on Thurdsay. Taking cues from weak Asian markets, the GIFT NIFTY futures fell over 80 points on Thursday morning, indicating a negative start for NIFTY50.

Brent crude oil prices bounced back near $110 per barrel on Thursday morning, after a drone attack on Saudi Aramco’s Shaybah oil field killed two people. The incident brought renewed concerns over the supply chain issues from the region.

The US stock markets closed upbeat on Wednesday as a rally in the tech stocks pulled the benchmark indices higher. The NASDAQ 100 surged over 1%, while the Dow Jones jumped over 330 points and S&P 500 rose 0.6%.

Shrugging off overnight positive cues from the Asian markets opened in deep red across the board on Thursday amid renewed concerns over viability of debt-backed AI-investment expenditure. The Korean KOSPI fell 1.8%, while Japan’s Nikkei and Hong Kong’s Hang Seng plunged over 500 points respectively.

NIFTY50 chart check

NIFTY50 extended its dullness on Wednesday as it closed 77 points lower amid renewed selling pressure at higher levels. The index failed to close above 23,000 for the second consecutive day, indicating a false breakout setup from the previous week.

The hourly chart price action showed a small bounce back in the closing hours on Wednesday; however, it failed to pull the index above the 20 and 50 EMA. Meaning, the momentum in the short term continues to remain sideways-to-negative.

Going forward, the swing low trendline from the October 8 lows will remain a crucial support zone, and 23,200 a pivotal hurdle for the index.

NIFTY 50 open interest summary

The open interest data for coming monthly expiry on October 27 indicates a limited upside on the upside. The 22,700, 22,800, and 23,000 calls witnessed strong open interest addition in Wednesday’s trading session. The 23,000 calls held the highest open interest, indicating a major resistance for NIFTY50 for the coming weekly expiry. On the flip side, 22,500 puts held the highest open interest, indicating a near-term support for the index.