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Trade setup for Oct 21: More downside for Nifty50? Key market cues before Thursday’s session

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Nifty50 has formed a long bear candle on the daily chart. What does this mean for the coming session and how is Dalal Street poised to start on Thursday? Read on...

Trade setup for Oct 21: More downside for Nifty50? Key market cues before Thursday’s session
Indian equity benchmarks suffered sharp losses on Wednesday, falling for a second straight day following a rally that lasted seven straight sessions. Selling pressure across most sectors led by auto, metal, oil & gas, FMCG and consumer goods shares pulled the market lower.
What do the charts suggest for Dalal Street now?
The Nifty50 index has formed a long bear candle on the daily chart, suggesting a sharp reversal, according to Nagaraj Shetti, Technical Research Analyst at HDFC Securities.
"The short-term trend of Nifty continues to be negative and there is a possibility of some more weakness in the next 1-2 sessions before any convincing bounce from the lows," said Shetti, who sees levels of 18,150-18,100 as important support.
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One leg of correction
The 50-scrip index appears to have completed one leg of correction, and levels of 18,150 and 18,200 could act as sacrosanct support for traders, said Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities.
"There is a strong possibility of a quick pullback rally up to 18,350-18,425 levels. On the other hand, dismissal of 18,150 could cause further intraday weakness, taking it up to 18,080," he said.
Here are key things to know about the market before Thursday's session:
SGX Nifty
At 8:03 am on Thursday, Nifty futures trading on Singapore Exchange -- an early indicator of the Nifty50 index -- were up 40 points or 0.2 percent at 18,357.
Global Markets
Equities in other Asian markets largely rose supported by a record high on Wall Street though rising US bond yields worried investors. MSCI's broadest index of Asia Pacific shares outside Japan was last seen trading up O.2 percent. Japan's Nikkei 225 benchmark was up 0.3 percent, and China's Shanghai Composite up 0.3 percent.
On Wall Street, the Dow Jones hit a record high on Monday and S&P 500 also rose, rising 0.4 percent each, but the tech stocks-heavy Nasdaq Composite declined almost 0.1 percent. S&P 500 E-Mini futures were flat in early trade Asian trade on Thursday.
What to expect on Dalal Street
The Nifty50 could decline by one more day (Thursday) before things stabilise, according to independent technical analyst Manish Shah. Momentum indicator MACD appears to be in a buy mode, and trend indicator ADX confirms a strong trend being intact, he said.
"The pattern of higher highs and higher lows is intact, and the Nifty trading within an up-sloping channel with support at 18,050-18,100. We are still a bit away from the support zone... A decline towards the support zone of 18,050-18,100 coupled with a bullish candlestick pattern is what we wait for," he said. 
Key levels to watch out for
The index is approaching an oversold level, said Chouhan. "Dip buyers might come to buy between 18,200 and 18,150 levels. On the upside, 18,450 and 18,500 would be the main resistance," he said.
FII/DII activity
Foreign institutional investors (FIIs) pulled out a net Rs 1,843.1 crore
from Indian equities on Wednesday. Net sales by domestic institutional investors (DIIs) stood at Rs 1,680.7 crore, exchange data showed.
Call/put open interest
The maximum call open interest is at the strike price of 18,500, followed by 18,600 and then 19,000. On the other hand, the maximum put open interest is at 18,000, NSE data shows. This suggests immediate resistance can be expected at 18,500, followed by 18,600, and immediate support comes in at 18,000.
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 (%)
INDUSTOWER1,20,09,2003053.18%45.88%
PERSISTENT2,74,5004,226.950.61%18.42%
METROPOLIS5,89,8002,848.903.93%13.90%
TECHM1,08,03,0001,546.850.51%8.52%
ZEEL6,36,06,0003264.98%7.40%
Long unwinding
SymbolCurrent OICMPPrice change (%)OI change (%)
IRCTC24,07,2754,403.65-20.69%-19.39%
GODREJPROP21,19,0002,325-2.67%-10.00%
HINDALCO2,55,63,500515.45-3.27%-6.75%
NTPC6,93,29,100147.1-1.64%-6.60%
MRF57,62082,549-0.76%-4.81%
(Decrease in open interest and price)
Short-covering
SymbolCurrent OICMPPrice change (%)OI change (%)
CONCOR84,32,385679.51.84%-2.19%
MINDTREE26,37,2004,786.150.60%-2.12%
IDEA78,60,30,00010.77%-1.37%
LTI6,42,0006,9701.58%-1.12%
CUB83,63,800168.40.96%-0.85%
(Decrease in open interest and increase in price)
Short build-up
SymbolCurrent OICMPPrice change (%)OI change (%)
JKCEMENT82,2503,202.10-3.62%37.02%
VOLTAS18,58,5001,252.05-3.83%27.06%
ICICIPRULI47,88,000635.3-3.97%22.21%
NAVINFLUOR7,59,8253,542.75-8.45%20.40%
DEEPAKNTR25,04,0002,587.55-11.65%17.81%
(Increase in open interest and decrease in price)
52-week highs
ICICI Bank, Infosys, SBI, Tech Mahindra, L&T Infotech and Coforge were among the 13 stocks in the BSE 500 universe that clocked 52-week highs.
52-week lows
Only one stock in the broadest index on the bourse hit a 52-week low: Strides Pharma Science.
Volatility gauge
NSE's India VIX index — which gauges the expectation of volatility in the near term — ended 5.4 percent higher at 18.31 on Wednesday -- its highest close since September 30.
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