Trade setup for October 20: Top 15 things to know before the opening bells

Nifty Trade setup for October 20

With a healthy and consistent three-day rally, the Nifty 50 not only smartly surpassed the falling resistance trendline but also cleared the June swing high hurdle. It closed above 25,700 with a 0.5 percent gain on October 17, thereby strengthening confidence among market participants well ahead of the Diwali celebration week. Experts believe that the index now appears poised for a strong bull run. If it closes and sustains above the long bearish gap of October 3, 2024 (25,740), the first target to watch will be 26,000, followed by 26,200–26,300. This zone coincides with the record high of 26,277, last seen on September 27, 2023. On the downside, immediate support is placed at 25,500.

Here are 15 data points we have collated to help you spot profitable trades:

1) Key Levels For The Nifty 50 (25,710)

Resistance based on pivot points: 25,771, 25,835, and 25,940

Support based on pivot points: 25,562, 25,498, and 25,394

Special Formation: The Nifty 50 formed a long bullish candle with minor upper and lower shadows on the daily chart, indicating a positive bias despite minor volatility. The index continued its higher high–higher low structure with above-average volumes and traded well above all key moving averages, which are trending upward. Momentum indicators also remained strong, with the RSI soaring to 69.34 and the MACD trending northward with a rising histogram. All these signals indicate continued bullish momentum.

2) Key Levels For The Bank Nifty (57,713)

Resistance based on pivot points: 57,820, 57,960, and 58,186

Support based on pivot points: 57,368, 57,228, and 57,002

Resistance based on Fibonacci retracement: 58,735, 60,142

Support based on Fibonacci retracement: 56,823, 56,200

Special Formation: The Bank Nifty entered uncharted territory on Friday by ending at a new record closing high, forming a bullish candle on the daily timeframe. This came with a continuation of the higher top–higher bottom formation. All key moving averages were seen trending northward, while the RSI jumped to 74.66 and the MACD stayed upward with a strengthening histogram. These factors collectively signal strong bullish strength in the banking space.

3) Nifty Call Options Data

According to the weekly options data, the maximum Call open interest was seen at the 26,000 strike (with 1.67 crore contracts). This level can act as a key resistance for the Nifty in the short term. It was followed by the 25,800 strike (1.18 crore contracts), and the 25,900 strike (1.03 crore contracts).

Maximum Call writing was observed at the 26,000 strike, which saw an addition of 55.5 lakh contracts, followed by the 25,900 and 25,800 strikes, which added 52.41 lakh and 28.82 lakh contracts, respectively. The maximum Call unwinding was seen at the 25,600 strike, which shed 33.8 lakh contracts, followed by the 25,550 and 25,500 strikes, which shed 17.64 lakh and 15.29 lakh contracts, respectively.

4) Nifty Put Options Data

On the Put side, the 25,500 strike holds the maximum Put open interest (with 1.16 crore contracts), which can act as a key support level for the Nifty. It was followed by the 25,300 strike (89.93 lakh contracts) and the 25,200 strike (81.28 lakh contracts).

The maximum Put writing was placed at the 25,700 strike, which saw an addition of 53.46 lakh contracts, followed by the 25,650 and 25,750 strikes, which added 33.66 lakh and 31.1 lakh contracts, respectively. The maximum Put unwinding was seen at the 25,400 strike, which shed 31.93 lakh contracts, followed by the 25,300 and 25,100 strikes, which shed 19.06 lakh and 11.36 lakh contracts, respectively.

5) Bank Nifty Call Options Data

According to the monthly options data, the 57,000 strike holds the maximum Call open interest, with 19.62 lakh contracts. This can act as a key level for the index in the short term. It was followed by the 58,000 strike (13.34 lakh contracts) and the 59,000 strike (9.93 lakh contracts).

Maximum Call writing was observed at the 59,500 strike (with the addition of 1.48 lakh contracts), followed by the 58,000 (1.41 lakh contracts) and 58,500 strike (1.36 lakh contracts). The maximum Call unwinding was seen at the 57,000 strike, which shed 1.11 lakh contracts, followed by the 56,700 and 56,800 strikes, which shed 96,180 and 95,935 contracts, respectively.

6) Bank Nifty Put Options Data

On the Put side, the maximum Put open interest was seen at the 57,000 strike (with 23.01 lakh contracts), which can act as a key support level for the index. This was followed by the 56,000 strike (13.06 lakh contracts) and the 56,500 strike (7.41 lakh contracts).

The maximum Put writing was placed at the 57,000 strike (which added 1.68 lakh contracts), followed by the 58,000 strike (1.56 lakh contracts) and the 57,500 strike (1.45 lakh contracts). The maximum Put unwinding was seen at the 56,500 strike which shed 43,365 contracts, followed by the 56,300 and 56,400 strikes, which shed 31,815 and 28,595 contracts, respectively.

7) Funds Flow (Rs crore)

8) Put-Call Ratio

The Nifty Put-Call ratio (PCR), which indicates the mood of the market, dropped to 1.21 on October 17, compared to 1.38 in the previous session.

The increasing PCR, or being higher than 0.7 or surpassing 1, means traders are selling more Put options than Call options, which generally indicates the firming up of a bullish sentiment in the market. If the ratio falls below 0.7 or moves towards 0.5, then it indicates selling in Calls is higher than selling in Puts, reflecting a bearish mood in the market.

9) India VIX

The India VIX, also known as the fear gauge, spiked further to 11.63—up 7 percent on Friday—and closed above short- and medium-term moving averages. However, historically, it still remains near lower zones and is not signaling any major caution for the bulls.

10) Long Build-up (32 Stocks)

A long build-up was seen in 32 stocks. An increase in open interest (OI) and price indicates a build-up of long positions.

11) Long Unwinding (47 Stocks)

47 stocks saw a decline in open interest (OI) along with a fall in price, indicating long unwinding.

12) Short Build-up (95 Stocks)

95 stocks saw an increase in OI along with a fall in price, indicating a build-up of short positions.

13) Short-Covering (40 Stocks)

40 stocks saw short-covering, meaning a decrease in OI, along with a price increase.

14) High Delivery Trades

Here are the stocks that saw a high share of delivery trades. A high share of delivery reflects investing (as opposed to trading) interest in a stock.

15) Stocks Under F&O Ban

Securities banned under the F&O segment include companies where derivative contracts cross 95 percent of the market-wide position limit.

Stocks added to F&O ban: RBL Bank

Stocks retained in F&O ban: Sammaan Capital

Stocks removed from F&O ban: Nil

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