Trade setup for Oct 5: Can NIFTY50 bounce back and sustain above 22,500 levels on Monday?

The GIFT NIFTY futures traded 171 points higher, indicating a gap-up opening for NIFTY50 on Monday. The easing supply disruption concerns and positive global markets could boost investor sentiments

Brent crude futures traded with a positive bias, holding firm north of the $102 per barrel mark on Monday as market participants continued to evaluate escalating Middle East geopolitical friction. Meanwhile, OPEC+ members resolved to keep current output targets unchanged for the coming month.

The US markets closed in the green across the board on Friday after softer conditions in the labour market eased the Federal Reserve’s rate hike bets. The tech-heavy NASDAQ 100 made a fresh peak by surging over 1%, followed by the S&P 500, which rose 0.7%, and the Dow Jones surged to close 250 points higher.

The Asian markets opened in the green on Monday morning across the board, except for Hong Kong. The Japanese benchmark indices surged over 2%, while the Taiwanese benchmark rose 1.5%. The Korean markets are closed today on account of a national holiday.

NIFTY50 chart summary

NIFTY50 logged its eighth consecutive week of losses, highlighting severe bearish momentum. The index also closed below the weekly 200-SMA level for the first time in over six years, indicating the severity of the subdued sentiment amongst investors. In the near term, a sustained weekly close above the 200-EMA level is crucial to reverse the bearish momentum in the index.

On the daily and hourly charts, the index continues to trade below the 20 and 50 EMA levels for more than a month. However, market participants hoped for some recovery from the oversold as the index made double-bottom candlestick chart patterns on the daily charts at 22,180-22,200 zone.

NIFTY50 open interest summary

The open interest data for the coming week's expiry indicates 22,000 level could act as a pivotal support for the NIFTY50 with the highest open interest on the put side with 1.0 crore contracts. On the other hand, 22,700 calls held the highest open interest, indicating a strong resistance for NIFTY50.