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Trade setup for May 26: Is Nifty50 about to sink below 16,000 on F&O expiry day?

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Trade setup for May 26: Is Nifty50 about to sink below 16,000 on F&O expiry day?

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Trade setup for Thursday, May 26: Volatility is likely on the monthly F&O expiry day and traders can expect 16,000 to act as sacrosanct support for the Nifty50, according to experts. Here's what the technical charts suggest.

Trade setup for May 26: Is Nifty50 about to sink below 16,000 on F&O expiry day?
Indian equity benchmarks continued to gyrate around the flatline before finishing in the red for a third straight session on Wednesday. Weakness in IT, metal and auto scrips pulled the headline indices lower.
Investors are bracing for more volatility on Friday the last day of the May F&O series.
What do the charts suggest for Dalal Street now?
The Nifty50 has formed a bearish candle on the daily chart in a broadly negative sign, according to Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities.
The short-term market structure is weak but the index is in oversold territory, he said.
Volatility may persist
As the 50-scrip index continues to move within the 15,700-16,400 range for two weeks, the bearishness in the market is palpable, though it has not made a new low since May 16, said independent technical analyst Manish Shah.
"The pattern is not clear at the moment. The MACD (a momentum indicator) has moved into a 'buy' mode but there is no price confirmation. The Nifty could remain in this range for a prolonged period," he said.
Here are key things to know about the market before the May 26 session:
SGX Nifty
Singapore Exchange (SGX) Nifty futures — an early indicator of the Nifty index— rose as much as 131 points or 0.8 percent to 16,153.5 early on Thursday, suggesting a higher opening ahead on Dalal Street.
Global markets
Equities in other Asian markets were a mixed bag on Thursday after minutes from the FOMC's last policy review showed a majority backing half-percentage-point rate hikes in June and July, which was along expected lines.
MSCI's broadest index of Asia Pacific shares outside Japan was down 0.3 percent.
Japan's Nikkei 225 was barely up, South Korea's KOSPI up half a percent and Singapore's Straits Times up 0.9 percent, but China's Shanghai Composite was down 0.2 percent and Hong Kong's Hang Seng down 0.7 percent.
S&P 500 futures were flat, suggesting a muted start ahead on Wall Street. On Wednesday, the S&P jumped one percent, the Dow Jones 0.6 percent and the tech stocks-heavy Nasdaq Composite 1.5 percent.
What to expect on Dalal Street
Chouhan said traders can expect 16,000 to act as a sacrosanct level, a successful move above which could take the index to the 16,150-16,260 band. "However, a fall below 16,000 is likely to more selling pressure, increasing the chances of 15,900-15,850 levels," he warned.
Important levels to track
The Nifty50 is more than 1,200 points below its long-term simple moving average.  

Period (No. of sessions)

Simple moving average
516,088.2
1016,037.3
2016,365.4
5016,937.7
10017,127.5
20017,261.6
Shah is of the view that one needs to wait for a confirmation of direction. "If the Nifty breaks below support at 15,700, we could see a decline to 15,400 or lower. On the upper side, if the 16400 barrier gets cleared, it could bounce to 16,800-17,000 levels," he said.
FII/DII activity
Call/put open interest
The maximum call open interest is accumulated at the strike price of 16,500, with nearly two lakh contracts, and the next highest at 16,400 and 16,700, with 1.8 lakh each, according to exchange data.
On the other hand, the maximum put open interest is at 15,500, with 1.5 lakh contracts, and the next at 16,000, with 1.4 lakh, followed by 15,800, with 1.2 lakh.
This suggests immediate resistance at 16,400 followed by a strong hurdle at 16,500, and immediate support is at the 16,000-mark, followed by the 15,500 cushion.
Long build-up
Here are five stocks that saw an increase in open interest as well as price:
StockCurrent OICMPPrice change (%)OI change (%)
HAVELLS20,46,0001,232.401.05%41.10%
ICICIPRULI27,99,0005202.70%39.79%
TORNTPOWER24,01,500431.850.50%35.98%
CONCOR31,32,800623.26.34%34.78%
BRITANNIA5,68,0003,512.901.16%28.98%
Long unwinding
StockCurrent OICMPPrice change (%)OI change (%)
NAVINFLUOR2,07,4503,584.05-3.65%-40.24%
APLLTD6,02,700739.75-2.43%-32.75%
TCS36,99,6003,174.10-2.98%-24.47%
INTELLECT5,00,250595.1-2.39%-24.44%
BSOFT18,98,000344.25-7.72%-24.18%
(Decrease in open interest as well as price)
Short covering
StockCurrent OICMPPrice change (%)OI change (%)
IGL44,22,000370.250.50%-34.95%
HDFCAMC12,51,8001,707.500.01%-34.33%
STAR25,72,200305.850.66%-10.15%
CUB45,56,000126.250.36%-8.88%
COLPAL9,01,6001,572.051.08%-8.23%
(Increase in price and decrease in open interest)
Short build-up
StockCurrent OICMPPrice change (%)OI change (%)
APOLLOHOSP10,20,2503,521.20-2.99%46.01%
SBICARD28,94,000743.55-1.53%39.34%
TRENT14,31,8751,038.60-3.30%31.65%
DIVISLAB9,21,3003,518.55-4.09%30.87%
ASIANPAINT19,73,4002,842.65-8.02%29.79%
(Decrease in price and increase in open interest)
52-week highs
No stock on the BSE 500 — the broadest index on the bourse — managed to scale a 52-week peak.
52-week lows
On the other hand, as many as 55 scrips hit 52-week lows.
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Fear gauge
The India VIX — known in market parlance as the fear gauge — cooled off 1.4 percent to settle at 25.3, a day after its biggest jump of the month.
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