As traders prepare for the week ahead, the stock market is poised for both opportunities and challenges. The Nifty 50 and Bank Nifty indices are approaching critical levels, and the overall market sentiment could swing in either direction. Here’s a detailed breakdown of the key points and insights that every trader should know before the markets open on Monday.
Bulls Gain Momentum, But Bears Lurk
After three days of consistent declines, the Nifty 50 staged a recovery on October 18, closing with a gain of 104 points at 24,850. This rebound, however, has not entirely negated the ongoing bearish trend that’s been building up over the past few weeks. On the bright side, the index held onto the neckline of a Head and Shoulders pattern at 24,670, and it managed to stay above the 20-week Exponential Moving Average (EMA) of 24,550.
The ability to close above these key levels offers a glimmer of hope for bullish traders, but it doesn’t mean the market is out of the woods. The formation of lower tops and bottoms on the charts suggests caution. If the index decisively closes below the 24,550-24,670 zone, a sharp sell-off could follow. Market experts believe that immediate resistance is placed at 25,000, followed by 25,200. These levels are critical for Monday’s trade and could define the market’s short-term trajectory.
In summary, while the bulls have managed to stop the bleeding for now, traders should remain vigilant. A decisive break below the current support levels could open the door to further downside, while a move above 25,000 could keep the rally alive.
Key Support and Resistance Levels for Nifty 50
The Nifty 50’s key support and resistance levels, based on pivot points, are crucial for traders to monitor on Monday. The following levels could help in identifying possible market trends:
Resistance: ➔ 24,891
➔ 24,966
➔ 25,088
Support: ➔ 24,648
➔ 24,573
➔ 24,451
Additionally, the index displayed a bullish candlestick pattern on daily charts, but it remains below its 20-day and 50-day EMAs. This is a mixed signal for traders. While the formation of the bullish pattern is positive, staying below key moving averages indicates that the market is not entirely bullish yet. Another noteworthy point is the proximity to the lower band of the Bollinger Band, suggesting heightened volatility in the near term.
In essence, Monday’s opening trade will largely depend on how the index behaves around these support and resistance zones. A break above 25,000 could indicate further upward momentum, while a dip below 24,550 might invite additional selling pressure.
Bank Nifty’s Performance Outshines Nifty 50
In contrast to the Nifty 50, the Bank Nifty performed exceptionally well in the last trading session, rising 1.6% to close at 52,094. It outpaced the broader market index and displayed robust technical signals. The index moved above all key moving averages and even exhibited a positive crossover in the Relative Strength Index (RSI), a momentum indicator that traders use to gauge market trends.
Resistance levels for Bank Nifty: ➔ 52,223
➔ 52,506
➔ 52,963
Support levels for Bank Nifty: ➔ 51,307
➔ 51,024
➔ 50,566
Moreover, the Bank Nifty formed a bullish candlestick pattern on the daily charts and came close to touching the middle of the Bollinger Band at 52,375. This suggests that the index could continue its upward trajectory in the coming days, especially if it breaches key resistance levels.
On the weekly timeframe, Bank Nifty climbed back to the middle of the Bollinger Band and formed a bullish candle. This development negates the previous pattern of lower highs and lower lows, which is a significant positive sign for traders. If the index sustains above its current levels, it could outperform the Nifty 50 in the upcoming week.
Nifty Call and Put Option Data
In the derivatives market, options data provides a valuable insight into market sentiment and potential turning points. For the Nifty 50, the Call options data indicates that the 26,000 strike holds the maximum open interest, with 57.19 lakh contracts. This level could act as a crucial resistance zone in the short term, as traders seem to be betting on the market not surpassing this level in the immediate future.
➔ The second-highest open interest was seen at the 25,000 strike, with 52.52 lakh contracts, followed by the 25,500 strike with 42.13 lakh contracts.
On the Put side, the 24,000 strike has the maximum open interest at 42.37 lakh contracts, indicating that traders expect strong support around this level. The next major levels are the 24,500 and 24,800 strikes, with 36.26 lakh and 33.11 lakh contracts, respectively.
➔ The maximum Put writing occurred at the 24,000 strike, with an addition of 17.59 lakh contracts, followed by the 24,700 and 24,500 strikes, which saw additions of 16.9 lakh and 13.77 lakh contracts, respectively.
This data suggests that the Nifty 50 is likely to find strong support between 24,000 and 24,500, while resistance at 25,000 and 25,500 could cap gains.
Bank Nifty Options Analysis
The Bank Nifty options data reveals a similar story. The 53,000 strike holds the maximum open interest in Call options, with 18.77 lakh contracts. This suggests that traders are expecting the index to face resistance around this level in the coming sessions. The 52,500 strike, with 16.93 lakh contracts, is another key resistance level.
➔ On the Put side, the 51,500 strike has the maximum open interest at 26.5 lakh contracts, followed by the 51,000 strike, which holds 22.91 lakh contracts.
The heavy interest in Put options around these levels indicates strong support, which could limit any potential downside in the index.
Market Sentiment: Put-Call Ratio and India VIX
The Put-Call Ratio (PCR) for the Nifty 50 climbed to 0.93 on October 18, up from 0.88 in the previous session. This rise in the PCR suggests that traders are increasingly betting on a bullish trend, as more Put options are being sold compared to Calls. A PCR above 0.7 generally signals a bullish market sentiment, while a reading below 0.7 tends to indicate bearishness.
Meanwhile, the India VIX, which measures market volatility, fell by 2.61% to 13.04, down from 13.39 in the previous session. Lower volatility often favors bulls, as it reflects calmer market conditions and less fear among traders. Despite the recent spike above the 14 level, the drop in the VIX is a positive sign for those hoping for a stable market environment in the upcoming week.
Key Stocks to Watch
As the market heads into a new trading week, several stocks are worth keeping an eye on. Aarti Industries and Birlasoft have been added to the F&O ban list, which restricts derivative trading in these companies. Stocks that remain in the ban list include Bandhan Bank, Chambal Fertilisers, and Tata Chemicals, among others. Traders should be cautious with these stocks, as being in the F&O ban means they have surpassed the market-wide position limit.
In terms of stock-specific activity, 55 stocks witnessed a long build-up, including HDFC Life Insurance and Mazagon Dock. This indicates that traders are betting on further price increases in these counters. Conversely, 14 stocks saw long unwinding, signaling that traders are closing out their bullish positions.
Funds Flow and Global Cues
Domestic institutional investors (DIIs) and foreign institutional investors (FIIs) play a pivotal role in determining market trends. In the past week, FIIs have remained cautious, with relatively muted inflows, while DIIs have continued to provide support to the market with steady buying. Global factors, including U.S. inflation data and geopolitical developments, will also influence the market sentiment.
Conclusion: Cautious Optimism Amidst Volatility
As the market gears up for Monday, traders should be prepared for potential volatility. Key support levels for the Nifty 50 are around 24,550, and a decisive close below this level could trigger a broader sell-off. On the flip side, breaking through the 25,000-25,200 resistance zone could keep the bullish momentum going. The Bank Nifty, with its strong technical signals, may continue to outperform the broader market, especially if it sustains above 52,500.
