Trade setup for Sept 29: Can NIFTY50 bounce back from current levels on expiry day?

GIFT NIFTY futures traded 18 points lower, indicating a weak start for NIFTY50 on Tuesday amid weak global market cues.

The Brent crude oil prices hovered near $107 per barrel on Tuesday morning, after hitting an intraday high of nearly $109 per barrel on Monday. Uncertainty gripped as the US rejected Iran’s proposal to reopen the Strait of Hormuz. Meanwhile, the East-West pipeline flow resumed, alleviating some pressure on supply disruptions.

The US stock markets opened the week on a negative note as the bond selloff deepened again. The US 10Y yields surged to 19-year high levels of 5.2%, adding worries of higher borrowing costs in the economy. The NASDAQ 100 fell over 1%, while the Dow Jones and the S&P 500 fell over 0.5% on Monday.

The Asian markets opened on a flat-to-negative basis on Tuesday as elevated crude oil prices and a surge in US Treasury yields soured investor sentiment. The Korean KOSPI fell 0.1%, while the Japanese Nikkei fell 0.2% on Tuesday morning. Meanwhile, the Hang Seng and Shanghai Composite fell as much as 0.5% on Tuesday.

NIFTY50 chart summary

The index continued to face immense selling pressure on Monday and closed below the pivotal June swing low trendline support. As indicated previously, a sustained close below 23,000 pivotal level would intensify weakness in the index.

However, the relative strength index (RSI) stands at 27, indicating a weak bullish divergence as the RSI remained flat, despite hitting fresh lows on the index. This suggests bears may be putting pressure on the index at higher levels, but could be running out of power. Hence, investors should watch out for a bounce back or reversal from current levels.

NIFTY50 open interest summary

The open interest data ahead of the monthly expiry indicates a strong open interest buildup above 23,000 levels. The 23,000 calls held the highest open interest, indicating strong resistance on the upside. On the downside, the 22,500 puts held the highest open interest, indicating strong downside support for the index on the monthly expiry day.