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Trade setup for Oct 27: Will Nifty50 extend pullback rally? Key market cues before Wednesday’s session

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

Trade setup for Oct 27: Will Nifty50 extend pullback rally? Key market cues before Wednesday’s session
Indian equity benchmarks extended gains to a second straight day on Tuesday, led by strength in auto, metal and select financial shares. Heavyweights Reliance Industries, Kotak Bank, Tata Steel and Titan were among the key movers. The Bank Nifty gauge edged higher to yet another closing high, taking its record-breaking run to a fourth straight session.
What do the charts suggest for Dalal Street now?
The Nifty50 index has formed a long bull candle on the daily chart, which suggests a reversal of the recent downtrend, according to Nagaraj Shetti, Technical Research Analyst at HDFC Securities. He expects further upside in the short term, with a high possibility of the Nifty50 revisiting its all-time high of 18,604.
"The market seems to have bounced back after weakness of the previous four sessions. The confirmation of a higher bottom reversal is likely to pull the index towards 18,600 in the coming week. Immediate support is placed at 18,200," he said.
More upside coming
The 50-scrip index has made a promising reversal formation near the 20-day simple moving average in a broadly positive sign, said Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities. It has also formed a higher bottom formation, supporting further uptrend.
As long as the index trades above 18,200, the pullback rally is likely to continue till 18,375, and further to 18,450. A dismissal of 18,200 may trigger further weakness up to 18,100-18,050, Chouhan added. 
Here are key things to know about the market before Wednesday's session:
SGX Nifty
At 7:51 am, Nifty futures trading on Singapore Exchange -- an early indicator of the Nifty50 index -- were down 47.5 points or 0.3 percent at 18,286, suggesting a weak start ahead on Dalal Street.
Global Markets
Equities in other Asian markets started Wednesday's session on a negative note despite a record high on Wall Street overnight. MSCI's broadest index of Asia Pacific shares outside Japan was down 0.8 percent in early hours. Japan's Nikkei 225 index was down 0.6 percent.
S&P 500 E-Mini futures were flat, suggesting a muted start ahead on Wall Street.
On Tuesday, The S&P 500 index scaled a record high, and the other two main US indices rose up to 0.1 percent.
What to expect on Dalal Street
Kotak Securities Head of Equity Research (Retail) Shrikant Chouhan expects 17,950 and 18,300 to be trend determining levels for the next few days. The market appears to be in the process of stabilising, but for that, the index should respect the 17,950 level. If that level is dismissed, the Nifty may come down to the 17,750-17,600 band, he said.
Rahul Sharma, Co-Founder of Equity99, expects volatility to continue in the market ahead of the monthly F&O expiry, due on Thursday. "We are witnessing a sectoral move in the market with realty and metal sectors performing well along with banks," he said.
He expects infrastructure, banking, metal and auto stocks to be in focus on Wednesday.
Key levels to watch out for
Nifty50: Sharma expects the index to find immediate support at 18,200, followed by 18,100 and then 18,000. On the upper side, 18,350 will act as strong resistance, followed by 18,475 and then 18,525, he said.
Bank Nifty: Strong resistance for the banking index is expected at 41,350, which, if breaks, might be followed by a hurdle at 41,600. Strong support is seen at 41,100, which, if broken, may be followed by 40,700 levels on the index.
FII/DII activity
Foreign institutional investors (FIIs) pulled out a net Rs 2,368.7 crore
from Indian equities on Tuesday. However, domestic institutional investors (DIIs) made net purchases of Rs 1,385.4 crore, exchange data showed.
Call/put open interest
The maximum open interest is at the strike price of 18,500, and next only at the 19,000 mark. 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, and 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 (%)
SIEMENS13,13,6752,1750.85%45.43%
NESTLEIND2,05,95019,228.453.11%17.77%
GODREJCP41,79,000964.352.06%17.28%
PIIND8,11,0003,0712.54%17.11%
APOLLOHOSP21,68,7504,274.502.55%16.18%
Long unwinding
SymbolCurrent OICMPPrice change (%)OI change (%)
IPCALAB9,33,9752,192.75-1.55%-26.81%
IDEA72,20,50,00010.4-0.95%-22.23%
INDUSTOWER1,48,17,600283.5-1.94%-20.58%
APLLTD15,09,750757.4-0.86%-16.83%
POLYCAB5,26,8002,298.35-1.64%-16.12%
(Decrease in open interest and price)
Short-covering
SymbolCurrent OICMPPrice change (%)OI change (%)
RECLTD2,86,20,000152.052.39%-37.11%
MPHASIS7,14,6753,254.401.54%-28.10%
L&TFH4,74,84,60485.14.80%-27.98%
SRF24,86,2502,121.450.85%-26.40%
TORNTPOWER24,78,000499.851.34%-22.03%
(Decrease in open interest and increase in price)
Short build-up
SymbolCurrent OICMPPrice change (%)OI change (%)
AXISBANK2,04,43,200845-0.01%21.25%
BANDHANBNK1,64,48,400303.95-1.70%16.51%
ICICIBANK5,43,11,125830.35-1.38%12.86%
INDUSINDBK74,26,8001,157.90-1.62%7.51%
NAM-INDIA18,27,200432.05-0.25%5.17%
(Increase in open interest and decrease in price)
52-week highs
Tech Mahindra, SBI, Punjab National Bank, Kotak Mahindra Bank, Bank of Baroda, Canara Bank, Indian Bank and Shriram Transport Finance were among the 15 stocks in the BSE 500 universe that clocked 52-week highs.
52-week lows
Only one scrip in the broadest index on the bourse hit a 52-week low: Indostar Capital Finance.
Volatility gauge
NSE's India VIX index — which gauges the expectation of volatility in the near term — eased 4.9 percent to settle at 16.8 on Tuesday, having dropped as much as 5.5 percent during the session.
Note To Readers

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