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Trade Setup for Aug 23: Will Nifty50 correct before next upmove? Check key market cues before Monday’s session

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The 50-scrip benchmark is expected to face major hurdles at 16,535 and 16,490 levels this week, according to Shrikant Chouhan of Kotak Securities. Here's how the August 23 session is poised to start.

Trade Setup for Aug 23: Will Nifty50 correct before next upmove? Check key market cues before Monday’s session
Indian equity benchmarks extended losses to a second straight day on Friday, after the Federal Reserve's hint at an earlier-than-expected withdrawal of its ultra-loose monetary policy hurt investor sentiment worldwide. Losses in financial and metal shares dragged the market lower, however, gains in the FMCG and pharma spaces limited the downside.
So, what do the charts suggest for Dalal Street?
The index formed a bullish candle on the daily scale but a bearish candle similar to the shooting star pattern on the weekly timeframe, according to Siddhartha Khemka, Head-Retail Research at Motilal Oswal Financial Services. Nifty50 negated its higher highs-higher lows formation of the last five sessions, and now has to continue to hold above 16,450 to extend the momentum towards 16,700, with support seen at 16,200," he said.
Major resistance up ahead?
"On a weekly basis, the market has formed a bearish hammer pattern that would invite further concerns. Major hurdles would be at 16,535 and 16,490 this week, said Shrikant Chouhan, Executive Vice President-Equity Technical Research at Kotak Securities.
Here are key things to know about the market before Monday's session:
SGX Nifty
Nifty futures trading on Singapore Exchange -- an early indicator of India's benchmark NSE Nifty50 index -- were up 174.5 points or 1.06 percent at 16,580 at 8:12 am, indicating a gap-up start ahead on Dalal Street.
Global markets
Asian equities logged cautious gains following last week's thrashing as Covid-19 concerns showed little sign of abating. Concerns over China's economy have only intensified in recent weeks, while Beijing's regulatory crackdown on the tech sector delivered a double blow to markets. MSCI's broadest index of Asia-Pacific shares outside Japan, which sank 4.8 percent last week to a nine-month trough, rose 0.2 percent in early deals on Monday.
Wall Street surged on Friday as investors looked past concerns over whether the US central bank could start to tighten its loose policy earlier than expected. However, the three main indices suffered weekly losses as a mid-week selloff pulled them away from record highs. Earlier that day, European markets made modest gains, though the pan-European STOXX 600 index logged its worst week since February.
The focus is now on a meeting of Federal Reserve officials at the annual Jackson Hole symposium in Wyoming, scheduled from August 26 to 28, for more clarity on monetary policy in the world's largest economy going forward.
What to expect
"The overall market looks weak. Investors are advised to adopt a cautious approach and keep a strict stop loss to their positions. After touching new highs, the market is expected to correct a bit before the next leg of the upmove," according to Rahul Sharma, Co-Founder of Equity99. He expects automobile, logistics, IT and pharma scrips to be in focus this week.
Key levels to watch out for
Nifty50: Technically, important support for the index is seen at 16,400, 16,225 and 16,000 levels, and resistance at 16,600, 16,720 and 16,900, according to Sharma.
Nifty Bank: The banking index has crucial support at 34,750, which, if broken, might take it to 34,600-34,400 levels. On the upper side, 35,425 will act as important resistance, which, if breaks, will be followed by 35,700 and 35,900 levels, he said.
FII/DII activity
Foreign institutional investors withdrew a net Rs 2,287.03 crore from the Indian capital market on Friday, and domestic institutional investors made net purchases of Rs 119.3 crore, exchange data showed.
Call/put open interest
The maximum open interest is accumulated at the strike price of 16,500, and then 16,600. On the other hand, there is a high degree of put open interest at the strike price of 16,400, and 16,000, NSE data shows. This indicates that immediate resistance can be expected at 16,500, and support comes in at 16,400.
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 (%)
BRITANNIA13,03,6003,8834.15%5.72%
MPHASIS7,46,8502,881.901.16%3.18%
BERGEPAINT41,04,100817.350.36%2.36%
ALKEM4,54,8003,807.550.23%1.50%
Long unwinding
SymbolCurrent OICMPPrice change (%)OI change (%)
PIIND9,40,0003,172.10-0.28%-24.92%
SUNPHARMA3,49,10,400758.45-2.97%-22.45%
ASHOKLEY3,58,24,500118.6-5.38%-19.47%
METROPOLIS3,52,8002,732.10-2.25%-18.59%
JINDALSTEL3,37,35,000373.5-8.47%-17.39%
(Decrease in open interest and price)
Short-covering
SymbolCurrent OICMPPrice change (%)OI change (%)
ASIANPAINT44,36,1003,103.853.18%-17.00%
HDFCBANK2,04,33,0501,513.400.03%-15.35%
MARICO86,14,000535.051.93%-13.65%
DABUR1,12,88,750608.71.78%-10.31%
PIDILITIND25,73,0002,2531.04%-10.09%
(Decrease in open interest and increase in price)
Short build-up
SymbolCurrent OICMPPrice change (%)OI change (%)
MOTHERSUMI2,86,96,500202.6-5.72%3.05%
GODREJPROP21,43,7001,476.35-2.21%3.00%
(Increase in open interest and decrease in price)
Stocks hitting 52-week highs
Hindustan Unilever, Bajaj Finance, Tata Consumer, Titan, Tata Elxsi, Britannia, Nestle, Mindtree, DMart, Fortis, Bata, Ipca Labs, Alkem, Kajaria Ceramics, Gujarat State Petronet, L&T Infotech and L&T Technology Services were among the stocks that clocked 52-week highs.
Stocks hitting 52-week lows
Aurobindo Pharma, Hero MotoCorp, Biocon, Alembic Pharmaceuticals, BBTC, Ujjivan Small Finance Bank, Gulf Oil Lubricants and Ujjivan Financial Services hit 52-week lows.
Volatility gauge
India VIX index -- which measures the expectation of volatility in the market -- jumped 8.60 percent to 14.02, having moved within a wide range of 12.35-14.14 on Friday.
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