Trade Setup for Oct 23: NIFTY50 ends below 100 DMA, more weakness below 24,400

Asian markets update

The GIFT NIFTY is flat, pointing to a subdued start for the NIFTY50 today. Meanwhile, major Asian indices are trading on a mixed note. Japan's Nikkei 225 is flat while Hong Kong's Hang Seng Index is up 0.3%.

U.S. market update

• Dow Jones: 42,924 (▼0.02%)
• S&P 500: 5,851 (▼0.05%)
• Nasdaq Composite: 18,573 (▼0.05%)

U.S. indices recovered from the session lows but ended the day on a negative note amid a sharp rebound in U.S. 10 year treasury yield. This comes after cautious commentary from Fed officials and that the central bank will not be aggressive with rate cuts moving forward. Currently, market is pricing in a quarter point cut for Fed’s November 7 meeting.

On earnings front, General Motor’s third quarter profit and revenue were above Street estimates, led by upbeat EV sales. The automaker also raised its guidance for third time this year.

NIFTY50

• October Futures: 24,538 (▼1.0%)
• Open Interest: 5,24,704 (▲1.6%)

After a flat start, the NIFTY50 index fell nearly 2% from the day’s high, closing below the crucial 24,700 mark, September’s key swing low. The index broke out of its 10-day consolidation phase, forming a bearish candle on the daily chart. It closed near the day’s low, signaling more weakness in the upcoming sessions.

As seen on the chart below, 24,700 and 24,800 zone, which was acting as support for the index will now act as immediate resistance. Conversely, the immediate support for the index is now between 24,200 and 24,000 zone. If the index slips below 24,400 level, it may extend weakness upto 24,000 zone.

The open interest data for the 24 October expiry has highest call open interest around 25,000 and 24,800 strikes. These levels may act as immediate resistance zones for the index. On the flip side, the put base was seen at 24,000 strike, indicating support for the index around this zone.

BANK NIFTY

• October Futures: 51,434 (▼1.2%)
• Open Interest: 1,72,979 (▲3.3%)

The BANK NIFTY index also came under selling pressure and fell below the immediate support level of 51,500. Apart from ICICI Bank (+0.3%), the index witnessed broad based selling with Punjab National Bank (-7.2%) and Canara Bank (-5.9%) being the top losers.

On the daily chart, the index came under selling pressure from its 20-day moving average for the second consecutive day, falling over 1% from its resistance zone. On the other hand, the index protected the key support level of 51,000 on a closing basis and ended the day slightly above the key support. In the coming sessions, the index could extend its weakness if it falls below 51,000 on a closing basis.

On the 15 minute chart, the index has immediate resistance around the 51,600-51,700 region, while support is located between the 50,900 and 51,000 zone. Unless the index breaks this range with a strong candle on the 15-minute chart, the trend may remain range-bound. A break of this range with a strong candle may provide traders with some short-term directional clues.

The open interest positioning for today’s expiry is skewed in favour of bears with substantial call open interest placed at 52,000 strike. This strike may act as immediate resistance for the index. Conversely, the put base was seen at 51,000 with relatively low volume, pointing at support for the index around this level. Traders should closely monitor the additions and unwinding of open interest, especially on put options.

FII-DII activity

Stock scanner

Under F&O ban: Aarti Industries, Bandhan Bank, Birla Soft, Chambal Fertilisers, Gujarat Narmada Valley Fertilizers & Chemicals (GNFC), IEX, Indiamart Intermesh, L&T Finance, Manappuram Finance, Piramal Enterprises, Punjab National Bank and RBL Bank Out of F&O ban: Granules India, Hindustan Copper, IDFC First Bank and Steel Authority of India

Added under F&O ban: Nil

In Futures and Options or F&O, long build-up means an increase in Open Interest (OI) along with an increase in price, and short build-up means an increase in Open Interest(OI) along with a decrease in price.

Source: Upstox and NSE.

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