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This article is more than 1 month old.

Trade setup for Oct 25: Is Nifty50 headed even lower? Key market cues before Monday’s session

Mini

Nifty50 has formed a dark cloud cover pattern. What does this mean and how is Dalal Street poised to start the coming session?

Trade setup for Oct 25: Is Nifty50 headed even lower? Key market cues before Monday’s session
Indian equity benchmarks extended losses to the fourth session in a row on Friday, dragged by auto, metal, IT and pharma shares. However, strength in the banking pack limited the downside. Broader indices tumbled around one percent each, hurting investors' sentiment.
What do the charts suggest for Dalal Street now?
The Nifty50 index has formed a dark cloud cover pattern on the weekly chart, in a bearish reversal signal, according to Rohit Singre, Senior Technical Analyst at LKP Securities. A short-term reversal can be seen if the index slips below the 18,000 mark, he said.
"The index has formed consecutive bearish candles suggesting that bears are trying to grip the market from higher levels, which will be possible if we drag below the 18k mark in the coming week," he said.
More pain cannot be ruled out
As Nifty still appears to be trading in an overbought zone and other emerging market indices finding resistance at current levels, a further correction in the index cannot be ruled out, said Yesha Shah, Head of Equity Research, Samco Securities.
Here are key things to know about the market before Monday's session:
SGX Nifty
At 7:59 am, Nifty futures trading on Singapore Exchange -- an early indicator of the Nifty50 index -- were up seven points at 18,151.5, suggesting a flat start ahead on Dalal Street.
Global Markets
Equities in other Asian markets were largely lower on Monday ahead of a week packed with major quarterly earnings announcements. MSCI's broadest index of Asia Pacific shares outside Japan was last seen trading 0.2 percent lower. Japan's Nikkei 225 index was down one percent.
S&P 500 E-Mini futures were down 0.1 percent in early Asian trade, hinting at a sluggish start in the US on Monday.
Last Friday, Wall Street ended a volatile session on a mixed note, after comments on stimulus tapering from Federal Reserve Chair Jerome Powell spooked markets trading at record levels. The S&P 500 and Nasdaq Composite indices declined 0.1 percent and 0.8 percent respectively, whereas the Dow Jones rose 0.2 percent.
What to expect on Dalal Street
The short-term trend of the index continues to be negative, with the overall chart patterns signalling chances of the bulls making a comeback from the lows, said Nagaraj Shetti, Technical Research Analyst at HDFC Securities. "The confirmation of a bullish reversal pattern in the subsequent session could open up a bounce in the market," he said.
Until the Nifty50 index makes a decisive directional move, traders are advised to maintain a cautious outlook and avoid venturing into aggressive bets, said Shah.
Key levels to watch out for
Shah believes there is strong support for Nifty50 at 18,050, any break below which can trigger a bearish sentiment across the market.
Mishra sees support for the index around 17,950 and resistance in the 18,200-18,400 zone.
FII/DII activity
Foreign institutional investors (FIIs) pulled out a net Rs 2,697.7 crore
from Indian equities on Friday. However, domestic institutional investors (DIIs) saved the day, with net purchases of Rs 1,030 crore, exchange data showed.
Call/put open interest
There is a high degree of call open interest at the strike prices of 18,200, 18,400 and 18,500. On the other hand, the maximum put open interest is at 17,500, and there is high accumulation at 18,000, NSE data shows. This suggests immediate resistance can be expected at 18,200, followed by 18,400, and support comes in only at 18,000 for now.
Long build-up
Here are four stocks that saw an increase in open interest as well as price, suggesting a build-up of long positions:
SymbolCurrent OICMPPrice change (%)OI change (%)
FEDERALBNK7,92,10,000103.56.76%21.39%
TITAN47,39,6252,424.800.76%3.27%
IPCALAB10,57,0502,2590.10%1.43%
PAGEIND99,24037,8350.73%1.33%
Long unwinding
SymbolCurrent OICMPPrice change (%)OI change (%)
ADANIPORTS5,43,86,250764.25-2.17%-31.46%
IBULHSGFIN2,99,73,900229.05-8.40%-25.35%
MPHASIS14,98,2503,236.75-4.75%-23.54%
LICHSGFIN1,65,80,000408-7.60%-22.23%
MCDOWELL-N1,51,62,500833.2-0.75%-20.44%
(Decrease in open interest and price)
Short-covering
SymbolCurrent OICMPPrice change (%)OI change (%)
IEX1,17,05,000763.20.46%-20.23%
POLYCAB10,09,2002,267.802.10%-19.80%
CONCOR76,89,960676.651.53%-16.30%
INDUSINDBK1,15,17,3001,197.750.67%-15.86%
DLF3,40,23,000412.350.87%-14.66%
(Decrease in open interest and increase in price)
Short build-up
SymbolCurrent OICMPPrice change (%)OI change (%)
LALPATHLAB8,59,5003,399.05-3.57%2.15%
RECLTD3,07,26,000150.65-2.90%2.13%
POWERGRID2,82,32,902193.9-0.44%1.32%
HINDALCO2,11,86,100472.55-4.60%1.08%
SRF28,70,6252,212.55-2.19%0.07%
(Increase in open interest and decrease in price)
52-week highs
HDFC, Kotak Mahindra Bank, ICICI Bank, SBI, Indian Bank, Inox Leisure, Rail Vikas and Shriram Transport were among the 14 stocks in the BSE 500 universe that clocked 52-week highs.
52-week lows
Only three stocks in the broadest index on the bourse hit 52-week lows: Biocon, Indostar Capital and Spandana Sphoorty.
Volatility gauge
NSE's India VIX index — which gauges the expectation of volatility in the near term — eased 2.7 percent to 17.55 on Friday, having slumped as much as 20.4 percent during the session.
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