Trade setup for Monday: Bearish trend suggests "sell on rally," but bounce-back possible amid downtrend

The Nifty 50 index has seen a significant drop, plunging nearly 5% from its record high and falling 1% on October 4. The index closed below its 50-day EMA (Exponential Moving Average) with above-average volumes for the first time in the last four months. Experts suggest that the overall trend favors the bears, indicating a "sell on rally" market, though a bounce-back is not entirely out of the question given the major downtrend. Key levels to watch are 24,750 if the index decisively breaks 25,000 on a closing basis, with resistance at 25,300. Here are 15 data points to help identify profitable trades:

1. Key Levels for the Nifty 50

Resistance (Pivot Points): 25,353, 25,476, and 25,674

Support (Pivot Points): 24,958, 24,835, and 24,637

The Nifty 50 formed a bearish candlestick pattern with a long upper shadow on the daily timeframe, indicating selling pressure at higher levels. This marks the continuation of the lower highs-lower lows formation for the fourth straight day. The 5-day EMA has fallen below the 10-day and 20-day EMAs, with a negative bias in the momentum indicator RSI (Relative Strength Index) on both the daily and weekly timeframes.

2. Key Levels for the Bank Nifty

Resistance (Pivot Points): 52,109, 52,348, and 52,734

Support (Pivot Points): 51,336, 51,098, and 50,711

Resistance (Fibonacci Retracement): 53,204, 53,446

Support (Fibonacci Retracement): 52,413, 51,929

The Bank Nifty recorded a bearish candlestick pattern with a long upper shadow, resembling an Inverted Hammer on the daily charts. While the Inverted Hammer is typically a bullish reversal pattern, confirmation is required in the following session. The index was down 0.74% at 51,462 on Friday, continuing its downtrend with lower tops-bottoms formation for the fifth consecutive session. For the week, it fell 4.4% and formed a long bear candle on the weekly timeframe, closing below both the 5-week and 10-week EMAs. The momentum indicator RSI showed a negative bias on the daily, weekly, and monthly charts.

3. Nifty Call Options Data

Maximum Open Interest: 26,000 strike (90.11 lakh contracts)

Key Resistance Level: 26,000 strike

Maximum Call Writing: 26,000 strike (33.31 lakh contracts added), followed by 25,400 and 25,200 strikes.

4. Nifty Put Options Data

Maximum Open Interest: 24,000 strike (46.03 lakh contracts)

Key Support Level: 24,000 strike

Maximum Put Writing: 24,000 strike (17.57 lakh contracts added), followed by 24,800 and 24,200 strikes.

5. Bank Nifty Call Options Data

Maximum Open Interest: 52,500 strike (22 lakh contracts)

Key Resistance Level: 52,500 strike

Maximum Call Writing: 52,000 strike (9.03 lakh contracts added)

6. Bank Nifty Put Options Data

Maximum Open Interest: 50,500 strike (15.65 lakh contracts)

Key Support Level: 50,500 strike

Maximum Put Writing: 50,500 strike (4.84 lakh contracts added)

7. Funds Flow (Rs crore)

8. Put-Call Ratio

The Nifty Put-Call ratio (PCR) dropped to 0.69 on October 4, from 0.88 in the previous session. A PCR higher than 0.7 or surpassing 1 generally indicates bullish sentiment, while a ratio below 0.7 or moving towards 0.5 reflects a bearish mood.

9. India VIX

Volatility has extended its sharp uptrend for the second straight session, climbing above the 14 level, causing discomfort for bulls. The India VIX jumped 7.27% to 14.13, adding to the 9.86% rally in the previous session.

10. Long Build-up (9 Stocks)

An increase in open interest (OI) and price indicates a build-up of long positions.

11. Long Unwinding (81 Stocks)

81 stocks saw a decline in OI along with a fall in price, indicating long unwinding.

12. Short Build-up (79 Stocks)

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

13. Short-Covering (15 Stocks)

15 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, reflecting investing interest.

15. Stocks Under F&O Ban

Added to F&O Ban: GNFC

Retained in F&O Ban: Bandhan Bank, Birlasoft, Granules India, Hindustan Copper, Manappuram Finance, RBL Bank

Removed from F&O Ban: None

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