Trade setup for Sep 10: NIFTY50 broke July swing low, can it defend June swing low of 23,000?

Indian benchmark indices are expected to extend their pullback on Thursday, plunging more than 2% this week. The GIFT NIFTY futures traded flat, indicating a muted start for NIFTY50 on Thursday.

The US stock markets closed in deep red on Wednesday as the Treasury yields surged to 3-year high levels, aggravating the possibility of a rare hike in the coming policy meeting. Consequently, the Dow Jones shed over 400 points, S&P 500 lost 0.48% on Wednesday.

Taking cues from elevated crude oil prices and rising bond yields, the benchmark indices in Asia opened lower. The KOSPI fell over 2%, followed by Japan’s Nikkei at -1.3% on Thursday morning.

Brent crude oil futures extended their rally on Wednesday, surging over 2.4%, hitting two-month high levels. The US conducted strikes on the oil tankers in the Strait of Hormuz, aggravating risks of supply disruptions from the region.

##NIFTY50 chart summary

The benchmark index broke the pivotal support levels on Wednesday, opening the gates for further downside. The NIFTY50 broke the July swing-low level of 23,600 and now shows the next support at 23,000, which is also a June swing-low level.

After falling over 2% in the week, the spot price stands over 600 points away from the key moving averages of the 20 and 50 EMA, adding hope for some pullback from current levels. The RSI of 26 on the daily chart indicates an oversold zone, indicating a bounce back or a time consolidation in the index.

NIFTY50 open interest summary

The open interest data for the upcoming weekly expiry indicates a broad range of trades for NIFTY50, between 23,000 and 24,000. The 23,000 puts hold the highest open interest, indicating strong near-term support. On the flip side, the 24,000 calls hold the highest open interest concentration at 1.19 crore contracts, indicating strong resistance for the index.