Trade setup for Oct 26: Can NIFTY50 defend 22,500 levels on Monday? GIFT NIFTY indicates a muted start

GIFT NIFTY futures traded 8 points lower on Monday morning, indicating a muted start for NIFTY50. Sharp fall in crude oil prices will help elevate the sentiments for Indian investors.

Brent crude oil prices plunged 6% on Monday morning, despite worries of strike on Iran after the US mid-term elections on November 3. Trump said that he would soon decide whether to pursue a deal with Iran or resume military offensive, as threats continue from Hourthis to the Middle-East region.

Wall Street closed largely in the red in the previous week plunging as much as 1.8%. The increasing anxiety over sustenance of debt finance AI-infrastructure spending and pessimism around overheated valuations, pulled the AI stocks lower. Dow Jones fell over 650 points, NASDAQ 100 erased early gains to close in red and S&P 500 fell 0.5% on Friday.

The Asian markets opened this week in red, with Taiwan's benchmark index losing 1.9%. Japan's Nikkei, Korean KOSPI fell as much as 1% on Monday morning. Meanwhile, Hong Kong’s Hang Seng index bucked the larger trend to trade in green on Monday morning.

NIFTY50 chart check

NIFTY50 closed the previous week with over 2.3% losses, erasing all the gains made in the week earlier. On the hourly charts, the index continued to trade below 20 and 50 EMA, indicating subdued price action for the index in the near term. Besides this, the index took support near the swing low trend line support at 22,372, making it the near-term floor on the downside.

On the upside, the daily 20 EMA level of 22,840 remains a major hurdle for bulls to regain strength in the medium term. The index also fell below the weekly 200 EMA levels in the previous week, indicating sustained bearishness over the near-term period.

NIFTY50 open interest

The open interest data for coming weekly expiry on October 27, indicates a broad trading range of 22,500 to 23,000. The 23,000 calls held the highest open interest, indicating a strong resistance and 22,500 puts held the highest open interest, indicating the near-term support. Meanwhile, the 22,700 and 22,800 calls witnessed open interest addition, indicating a limited upside for the index.

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