Trade Setup for Oct 8: NIFTY50 breaks below 25,000—will it defend the September month low?

Asian markets update

The GIFT NIFTY is down 0.3%, pointing to a negative start for the NIFTY50 today. Sentiment in Asian markets remains weak, with Japan's Nikkei 225 down 1% and Hong Kong's Hang Seng Index down over 3%.

U.S. market update

• Dow Jones: 41,954 (▼0.9%)
• S&P 500: 5,695 (▼0.9%)
• Nasdaq Composite: 17,923 (▼1.1%)

U.S. indices fell on Monday as rising crude oil prices and a jump in the 10-year Treasury yield weighed on investor sentiment.Oil prices jumped more than 3% as tensions in the Middle East remained high. With the exception of energy stocks, all major sector indices in the S&P500 ended the day in the red, with technology stocks posting the biggest declines.

NIFTY50

• October Futures: 24,985 (▼0.6%)
• Open Interest: 5,53,303 (▲0.2%)

After a positive start, the NIFTY50 failed to sustain gains, extending its losing streak to a sixth consecutive day. The index formed a bearish candle on the daily chart and ended below its 50-day moving average for the second day in a row.

On the daily chart, the index has taken support in the zone of the September month low, around 24,750. If the index slips below this zone on a closing basis, we may witness further weakness. However, the index has slipped over 5% in the last six trading sessions, hinting of entry into the oversold zone in the near-term.

The broader trend of the index has turned bearish with significant call open interest placed at 25,500 and 25,000 strikes for 10 October expiry. These levels will act as immediate resistance zones for the index. Conversely, the put base was seen at 24,000 strike, suggesting support for the index around this zone.

BANK NIFTY

• October Futures: 51,016 (▼1.5%)
• Open Interest: 2,04,177 (▲17.6%)

The BANK NIFTY surrendered its 100-day moving average, driven by a sharp sell-off in the broader banking sector. The index extended its downtrend for the sixth consecutive day, ending the day near September's low of around 50,350.

As seen in the chart below, similar to the benchmark NIFTY50, the banking index is at a crucial juncture at the September low of around 50,350. If the index falls below this zone on a closing basis, the weakness could extend to the next key support zone at 49,500 and 49,600. On the other hand, immediate resistance for the index is around its 20-day moving average.

For 9 October expiry, BANK NIFTY has highest call open interest at 51,500 strike and the substantial put bast at 50,000 strike. Traders are expecting the expiry of 9 October’s options contract within this range. However, it is important to note that the index has remained in the downtrend for past five trading sessions and it may consolidate around these levels in the near-term.

FII-DII activity

Stock scanner

Under F&O ban: Bandhan Bank, Birlasoft, Gujarat Narmada Valley Fertilizers & Chemicals (GNFC), Granules India, Hindustan Copper, IDFC First Bank, Manappuram Finance, Punjab National Bank and RBL Bank

Out of F&O ban: NIL

Added under F&O ban: IDFC First Bank and Punjab National Bank

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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