Trade setup for Oct 23: GIFT NIFTY futures indicate gap up opening on Friday, will it sustain?

Shrugging off the overnight cues from the US markets and early morning Asian market fall, the GIFT NIFTY futures jumped 121 points, indicating a positive start for NIFTY50 on Friday.

Brent crude oil prices surged above $113 per barrel on Friday morning, after President Trump said that the US is not negotiating with Iran and something would soon happen, indicating further escalations in the Middle East crisis.

US stocks ended in deep red on Thursday amid a sharp sell-off in tech stocks across the board. The NASDAQ 100 plunged 860 points or 2.9%, and S&P 500 fell 1.2%, led by a deep correction in tech stocks, while defensive stocks held the Dow Jones afloat with an 11-point gain on Thursday.

Taking cues from the overnight fall in the US stock market, the Asian markets opened in red across the board. The Korean KOSPI fell 2.5%, and Japan’s Nikkei dipped 1.8% on Friday morning.

NIFTY50 chart check

NIFTY50 extended its downward trajectory on Thursday, ending 123 points lower. The index dipped below important threshold levels. On the hourly charts, the index fell below 20 and 50 and delivered a negative crossover, indicating persistent bearish momentum in the short term. Besides this, the index also closed below the 8 October swing low trendline support, trending downward to the next support level of 22,400.

On the daily charts, the index made a doji candlestick pattern, indicating indecision on future direction for the index. Going forward, a weekly close above 22,860 and below 22,400 would help decide the clear direction for the index.

NIFTY50 open interest summary

The open interest data, showed interesting divergence during Thursday’s trading session, the 22,900, 23,000, 23,100 calls witnessed strong unwinding in the open interest, opening up possibilities of short covering on the upside. On the flipside, 22,600 puts witnessed strong open interest addition, and 22,500 held the highest open interest, indicating limited downside on Friday.