Trade Setup For Dec 19: 18,100 now crucial for the Nifty 50 after index breaks below the 20-day moving average

18,100 is now the key level for the Nifty 50 index after the benchmark indices decisively broke below the 20-day moving average on Friday, in-line with the global markets. The street is starting to fear prospects of a global recession and aggressive rate hikes. Friday's fall meant that the market ended in the negative for the second week running, and also closed at a one-month low.

The broader markets underperformed the benchmark indices. The Midcap index fell nearly 2 percent on Friday to turn negative for the week. Outperformers for the month, the PSU Banks also witnessed a pullback with cuts between 3-6 percent. 35 stocks on the Nifty 50 index reported losses for the week.

Sandeep Bhatia of the Macquarie Group expects the Indian market to do well going into 2023 but sees some pressure and things to get difficult in the extreme near-term of December and January.

"The budget will be around the corner in February and there will be intense speculation as to where and what will happen," Bhatia told CNBC-TV18 in an interaction on Friday. "My own view is that budgets come and go, the underlying economy is what matters."

Ruchit Jain of 5paisa.com said that the market usually retraces from overbought zones as it did from an all-time high on 18,888 on December 1. The resultant profit booking meant the Nifty 50 ended below the support zone to confirm a lower top lower bottom structure. Not only has the Nifty 50 closed below its 20-day moving average, it has also given a breakdown from a "head and shoulder" pattern to confirm a reversal.

Same is the case for the Nifty Bank index, which has witnessed heavy selling pressure after making record highs at the start of the week. Kunal Shah of LKP Securities maintains that the index remains in a sell-on-rise mode with resistance in the 43,600 - 43,800 zone.

Asian indices have opened lower at the start of the week carrying on from Friday's sell-off on Wall Street. Shanghai has also announced that it will shut most schools again as Covid-19 cases surge.

The Nikkei 225 index is trading with cuts of close to 1 percent while the Kospi is down 0.5 percent.

US Markets continued to sell-off post the Fed Policy, ending lower for the second successive week. The Dow Jones fell close to 300 points on Friday. The S&P 500 has now declined 5.6 percent in December, after shedding over 2 percent for the week.

The Nasdaq also fell close to 3 percent as fears grow over a recession taking place as the Federal Reserve continues raising rates.

"I think we are seeing a situation where people would consider debt as well as SIP, both, and that will be the change that we will see in 2023," S Naren of ICICI Prudential told CNBC-TV18 in an interaction. He further went on to say that inflation will become a much smaller issue in the upcoming year and therefore multi-assets products, which invest in all asset classes like debt, equity, gold, silver, REIT, will become much more interesting. "You are still going to have a volatile year ahead."

5Paisa's Jain believes the next support level to watch out on the Nifty 50 index will be around 18,134, followed by 18,070, which is the 38.2 percent retracement level of the upmove from 16,800 to 18,888. On the upside, 18,430 and 18,500 will be an immediate level of resistance.

Kunal Shah of LKP expects the immediate downside support on the Nifty Bank to be in the 43,000 - 42,800 zone and in case the index falls below these levels, it may trigger further selling pressure.

For the weekly options expiry this Thursday, December 22, the 18,400 strike call of the Nifty 50 added close to 55 lakh shares in Open Interest, followed by the 18,500 call (28.75 lakh) and the 18,600 call (23.14 lakh).

On the downside, maximum Open Interest addition was seen in the 18,000 put (28.1 lakh shares), followed by the 18,100 put (20.3 lakh) and 18,200 put (9.2 lakh).

Balrampur Chini has entered the F&O Ban ahead of the new week, joining the likes of IRCTC, PNB, Indiabulls Housing Finance, GNFC, Delta Corp and BHEL that are already in the ban.