Trade setup for Oct 27: Can NIFTY50 extend the pullback above 22,800 on monthly expiry day?

Indian benchmark indices are expected to remain volatile on the monthly expiry session on Tuesday. After snapping the losing streak on Monday, the NIFTY50 is again set to open in red with 100-points gap down opening. The global market cues remain largely positive, with crude oil prices extending their pullback and overnight gains in the US markets.

Brent crude oil prices extended their pullback, dropping another 1.5% on Tuesday morning to trade near $109 per barrel. Renewed diplomatic efforts in the Middle East raised hopes of de-escalation in the US-Iran war.

The US stock markets staged a strong comeback on Monday as investors chose defensive bets amid apprehensions over valuations of AI stocks. However, Anthropic’s IPO plans boosted sentiment for chip stocks as well. The Dow Jones, S&P 500 and NASDAQ 100 closed 0.6% higher.

Asian benchmark indices extended the overnight buoyancy as the Japanese and Korean indices snapped the three-day losing streak. The Korean KOSPI surged over 3%, and the Japanese Nikkei rose nearly 2% on Tuesday morning.

NIFTY50 chart check

NIFTY50 staged a smart recovery on Monday, surging over 150 points and recouping most of Friday's losses. The index also closed above the important 20 and 50 EMA levels, indicating a reversal in the momentum ahead of the monthly expiry.

On the daily charts, the index formed an inside candle, suggesting a reversal, and also bounced back from the swing low trendline support, suggesting 22,400 as a pivotal support zone for coming sessions. The higher lows and lower highs formation on the daily chart indicates consolidation before a big move. The bullishness could be regained if the index manages to close above the daily 20 EMA level of 22,831.

NIFTY50 open interest summary

Ahead of the monthly expiry, the bounceback in the previous session changed the open interest data for the index. The 22,400, 22,500, 22,600, and 22,700 puts witnessed a strong open interest addition in Monday’s session, indicating strong support on the downside for today’s monthly expiry. Meanwhile, the upside looks limited at the 23,000 level, with the highest open interest on the call side.

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