Trade Setup for Oct 9: NIFTY50 holds September month low, forms bullish reversal pattern

Asian markets update

The GIFT NIFTY is up 0.1%, pointing to a flat-to-positive start for the Indian equities today. Meanwhile, the other Asian markets are firmly trading in green. Japan’s Nikkei 225 is up 0.8%, while Hong Kong’s Hang Seng index jumped 1.6%.

U.S. market update

• Dow Jones: 42,080 (▲0.3%)
• S&P 500: 5,751 (▲0.9%)
• Nasdaq Composite: 18,182 (▲1.4%)

U.S. indices closed higher on Tuesday amid a pullback in oil prices and a rebound in technology stocks. The strong rebound in tech stocks was led by Nvidia, which rose 4%.

Investors will also be watching the minutes of the Federal Reserve's September meeting, which will be released later today. Last month, the Fed cut interest rates by half a percentage point to between 4.75% and 5.0%. The central bank's next meeting is on 6-7 November, closer to the U.S. election. The market is currently pricing in a 90% probability of a quarter-point cut.

NIFTY50

• October Futures: 25,131 (▲0.6%)
• Open Interest: 5,61,369 (▲1.4%)

The NIFTY50 index snapped its six-day losing streak and rebounded from the low of the September month and ended the Tuesday’s session in the green. The index formed an inside candle on the daily chart, also known as the bullish harami pattern.

A bullish Harami pattern is a two candlestick reversal signal where a small bullish (green) candle forms within the body of a previous larger bearish (red) candle. It indicates a potential reversal from a downtrend to an uptrend if the close of the subsequent candle is higher than the reversal pattern.

As you can see on the chart below, the index has immediate support between yesterday’s low. If the index sustains this level on closing basis, then it may extend the gains upto 25,350 zone. On the other hand, a close below the Tuesday’s low may extend the weakness till 24,400 zone.

Open interest data for the October 10 expiry shows significant call open interest at the 25,500 and 25,000 strikes, suggesting that the index may face resistance around these levels. Conversely, put open interest was seen at the 25,400 and 25,000 strikes, suggesting support for the index around these levels.

BANK NIFTY

• October Futures: 51,392 (▲0.8%)
• Open Interest: 1,97,623 (▼3.2%)

The BANK NIFTY index also snapped its losing streak and ended the Tuesday’s session in the green, forming an inside candle on the daily chart. The index took support near the September month’s low and consolidated around its 100-day moving average. On the daily chart, the index's broader trend remains bearish, with immediate resistance near its 20- and 50-day moving averages (DMAs). However, a close above the high of the inside candle formed on the 8th could extend gains to the 50 DMA. Conversely, a close below the low of the inside candle could signal further weakness.

On the 15 minute chart the index is likely to be range-bound between 51,500 and 50,300. Traders may consider directional strategies if the index breaks out of this range on a closing basis.

Open interest data for today's expiry shows the highest call and put base at the 51,000 strike, suggesting a likely range-bound movement around this level. In addition, significant call accumulation at the 51,500 strike and put accumulation at the 50,500 strike suggest key resistance and support levels for today's expiry.

FII-DII activity

Stock scanner

Short build-up: SBI Life Insurance and Godrej Consumer Products

Out of F&O ban: NIL

Added under F&O ban: Steel Authority of India

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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