Trade setup for Oct 12: As Nifty gives up key support at 17,000, more downside likely on Dalal Street

All sectors succumbed to selling pressure on Dalal Street, with IT shares under pressure even as TCS kicked off the earnings season on a strong note.

What do the charts suggest for Dalal Street?

The Nifty50 has formed a long bearish candle on the daily chart, suggesting further weakness up ahead, according to Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities.

Having breached important support at 17,150, the Nifty50’s correction wave may continue all the way to 16,850-16,800 levels, he said. “On the flipside, key intraday resistance will be at 17,050, above which, a minor pullback rally is possible till 17,100-17,125.”

Nifty Bank fails to take out a key hurdle

The Nifty Bank faces strong resistance at 39,500, where aggressive call writing exists, and a slide below 38,000 on a closing basis may lead to more downside, said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.

Here are key things to know about the market ahead of the October 12 session:

Global markets

European markets fell for a fifth straight session on Tuesday, pressured by a rise in government bond yields globally, with investors worrying about a potential recession and the impact on corporate profits from a rapid rise in interest rates. The pan-European STOXX 600 index fell as much as 1.2 percent in early hours.

S&P 500 futures were down one percent, suggesting a gap-down opening ahead on Wall Street.

What to expect on Dalal Street?

The Nifty50 may test a swing low, near 16,750, where buying support may come in(16,750-16,800), said Gaurav Ratnaparkhi, Head of Technical Research at Sharekhan by BNP Paribas.

He expects the 17,250-17,300 zone to continue to play the role of resistance in the short term.

LKP’s Shah expects the banking index to move within a range of 38,000-39,500 as investosr globally await crucial data.

Key moving averages

Tuesday’s fall sent the Nifty50 almost three percent below its long-term moving average, from 1.5 percent the previous day.

Key levels to watch out for

The maximum call open interest is accumulated at the strike price of 17,200, with 1.9 lakh contracts, and the next highest at 18,000, with 1.8 lakh contracts, according to provisional exchange data. The maximum put open interest is placed at 17,000, with 1.1 lakh contracts, and at 16,000, with more than one lakh.

This suggests a strong hurdle at 17,100 and a strong base only at the 16,000 mark.

FII/DII activity

Foreign institutional investors (FIIs) remained net sellers of Indian shares for a second straight trading day on Monday following three back-to-back days of buying, according to provisional exchange data.

Long build-up

Here are five stocks that saw an increase in open interest as well as price:

Long unwinding

(Increase in price and decrease in open interest)

Short covering

(Increase in price and decrease in open interest)

Short build-up

(Decrease in price and increase in open interest)

52-week highs

A total of six stocks in the BSE 500 universe — the broadest index on the bourse — reached the milestone: Tata Chemicals, Chalet Hotels, Kalpataru Power, Praj Industries, Shree Renuka and Star Cement.

52-week lows

An equal number of stocks hit 52-week lows: Biocon, Intellect Design Arena, OFSS, Mastek, Medplus Health and Shilpa Medicare.