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Trade Setup: Can Nifty50 sustain momentum to test 16,500 soon? Check key market cues before Thursday’s session

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Nifty50 extended its record-breaking run to a second straight session on Wednesday. The index has bullish candle on the daily scale and is making higher highs-higher lows for the past five sessions. Here is how the August 5 session is poised to start.

Trade Setup: Can Nifty50 sustain momentum to test 16,500 soon? Check key market cues before Thursday’s session
It was a second day of record closing highs on Dalal Street, as Sensex and Nifty50 were boosted by sharp gains in banking stocks amid positive global cues. Nifty Bank spiked 2 percent, taking gains in three sessions to more than 4 percent.
So, what do the charts suggest for Dalal Street?
Nifty50 has formed a bullish candle on the daily scale and is making higher highs-higher lows for the past five sessions, said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.
If the index manages to sustain the current momentum, we can witness an upmove towards 16,400-16,500. On the downside, the 16,000 level could act as key support, he added.
"The index's short-term trend continues to be up and a sharp upside breakout has been confirmed. Having risen sharply in two sessions, a weak market breadth is likely to pull the market into profit booking from the highs in the coming 1-2 sessions," said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.
Bull exhaustion
"A parallel consolidation ensued through the day, once pushing the index into the 16,200-16,250 region. This indicates bull exhaustion... Nevertheless, patterns are yet to show weakness, and the 16,350 objective continues to be in play. Mean reversion studies suggest that we might see Nifty consolidate near 16,200 before making a run beyond 16,480," said Anand James, Chief Market Strategist, Geojit Financial Services.
Here are key things to know about the market before Thursday's session:
SGX Nifty
Nifty50 futures trading on Singapore Exchange -- an early indicator of the Nifty50 benchmark index in India -- were last seen trading up 10 points or 0.06 percent at 16,270.50 ahead of the opening of Indian markets, indicating a mildly positive start on Dalal Street ahead.
Call/put open interest
The maximum call open interest is at the strike price of 16,300, and then 16,400. On the other hand, the maximum put open interest can be seen at 16,000, and then at 15,900, according to data from NSE. This indicates that immediate resistance can be expected at the 16,300 mark, followed by 16,400, and support comes in at the 15,900-16,000 levels.
Key levels to watch out for
Nifty50: "On Thursday, Nifty50 is seen trading in the 16,200-16,300 range and would try to bridge the price gap left between 16,176 and 16,146 after the break of 16,200. On the other hand, if it crosses 16,300, the chances of it hitting the 16,370-16,400 levels would be brighter," said Shrikant Chouhan, Executive Vice President - Equity Technical Research, Kotak Securities. He suggests trading by level.
Nifty Bank: Having regained the 36,000 mark, Bank Nifty will find immediate support at 35,960 going forward, said Rahul Sharma, Co-Founder, Equity99. On the upside, levels of 36,250-36,400-36,560 will act as resistance.
Long build-up
Here are five stocks that saw an increase in open interest as well as price, suggesting a build-up of long positions:
SymbolCurrent OICMPPrice change (%)OI change (%)
ICICIPRULI5,932,500670.12.70%13.53%
AUBANK2,056,0001,250.854.54%12.89%
GRANULES9,530,950390.61.84%11.63%
GUJGASLTD1,470,000771.41.02%11.14%
HDFC12,617,7002,674.154.54%11.00%
Long unwinding
SymbolCurrent OICMPPrice change (%)OI change (%)
TRENT1,272,375933-1.02%-2.51%
GODREJPROP2,425,8001,636-0.75%-2.49%
BRITANNIA1,797,4003,579.80-0.27%-1.60%
BATAINDIA2,197,2501,658.10-1.86%-1.38%
ALKEM564,2003,414.15-3.00%-1.28%
(Decrease in open interest and price)
Short build-up
SymbolCurrent OICMPPrice change (%)OI change (%)
TORNTPOWER3,036,000472.351.50%-3.90%
HDFCBANK28,664,3501,469.101.96%-1.63%
JSWSTEEL43,780,500747.20.81%-0.68%
LUPIN6,040,9501,153.200.69%-0.65%
CUB9,061,300154.51.48%-0.51%
(Increase in open interest and a decrease in price)
Short-covering
SymbolCurrent OICMPPrice change (%)OI change (%)
COFORGE521,8004,738-4.56%187.43%
BOSCHLTD141,35015,149.95-1.03%31.09%
INDUSTOWER15,016,400207.55-6.91%28.66%
PETRONET23,586,000215.9-2.37%18.99%
RBLBANK33,544,300180.9-3.60%15.45%
(Decrease in open interest and an increase in price)
Volatility gauge
India VIX index -- a measure of volatility in the market -- eased 3.9 percent to end at 13.21, a day after logging its biggest jump in a fortnight. "Stability in volatility indicates that bulls are holding the market to cheer fresh momentum," said Khemka.
Global markets
Equities in other Asian markets held on to recent gains on Thursday. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.22 percent, and Japan's Nikkei 0.32 percent. Chinese blue chips fell 0.28 percent. Overnight on Wall Street, the three main indices closed mostly lower, with the S&P 500 falling from a record high as data signaled a sharp slowdown in jobs growth in July. Hawkish remarks from a senior Fed official boosted the dollar.
FII/DII flow
Foreign institutional investors bought Indian equities worth a net Rs 2,828.57 crore on Wednesday -- their second straight net purchase, exchange data showed. Domestic institutional investors, however, pulled out Rs 411.36 crore.
Earnings to watch
Adani Power, Aditya Birla Capital, Aurobindo Labs, Cipla, GAIL, Indiabulls Housing Finance and REC are scheduled to report their earnings for the quarter ended June on Thursday. Tata Chemicals, NCC, Amtek Auto, Arvind, Escorts, Brigade, Gujarat Gas and Ipca Labs are also among the companies due to post their quarterly numbers on the same day.