Trade setup for 3 June: NIFTY50 protects 20-DMA, forms inside candle on daily chart

Asian markets update 7 am

The GIFT NIFTY is signalling a strong start for the NIFTY50 today, with a gap-up of almost 3%, following the announcement of the exit polls on 1 June. This means that the NIFTY50 is likely to open above 23,300. Other Asian markets are also trading positively. Japan's Nikkei 225 is up 1%, while Hong Kong's Hang Seng is up 1.6%.

U.S. market update

• Dow Jones: 38,686 (▲1.5%)
• S&P 500: 5,277 (▲0.8%)
• Nasdaq Composite: 16,735 (▼0.0%)

U.S. equities ended the Friday’s session on a positive note after inflation data came in line with expectations. Core PCE, the Fed's key measure, rose 0.2% in April as expected, in line with forecasts. On a year-on-year basis, core PCE rose to 2.8%, easing investors' concerns about aggressive rate hikes.

NIFTY50

• June Futures: 22,700 (▲0.3%)
• Open Interest: 5,95,680 (▲8.1%)

The NIFTY50 index closed the Friday’s session on a positive note and ended the four-day losing streak. The index formed an inside candle on the daily chart and protected the psychologically crucial 22,500 mark on closing basis.

On the daily chart, the NIFTY50 is currently trading above all its key daily moving averages such as 20 and 50 and is maintaining the higher-high and higher-low structure. For the upcoming week, traders keep the approach simple. Since an inside candle has emerged on the daily chart, a break of the high and low on the closing basis of the mother candle (formed on 30 May) can be monitored. A close below or above will provide traders further directional clues.

Meanwhile, the open interest (OI) data for the 6 June expiry which is scattered. The highest call OI was seen at 23,000 and 23,500 strikes, suggesting resistance for the index around these levels. On the other hand, the put base is accumulated at 21,000 and 22,000 strikes, indicating support around these levels.

BANK NIFTY

• June Futures: 49,352 (▲0.7%)
• Open Interest: 1,51,184 (▼7.3%)

The BANK NIFTY index displayed strength for the second consecutive day and closed the Friday’s session in the green. The index formed a positive candle on the daily chart, with a longer long lower shadow, suggesting buying interest at the lower levels.

Despite the volatility, the BANK NIFTY protected its gains throughout the day and attempted to close above 49,000 at the end of the session. However, selling pressure emerged and prevented a close above this level. This suggests a tug of war between buyers and sellers. Similar to the NIFTY50, the index remains above its major daily moving averages (20-day and 50-day), indicating underlying strength. Looking ahead, traders should keep an eye on the 49,500 level. A close above this level would add to the bullish momentum, while a close below 47,000 could signal a shift in favour of the bears.

The open interest data for the 5 June expiry remains scattered ahead of the announcement of the results of the general elections in India. The maximum call OI was seen at 50,000 strike and the put OI is accumulate at 48,500 and 47,000 strikes.

FII-DII activity

Stock scanner

Long build-up: Vodafone-Idea

Short build-up: IPCA Laboratories, Berger Paints, Persistent Systems and Bosch

Under F&O ban: N/A

In Futures and Options or F&O, long build-up means an increase in Open Interest (OI) along with an increase in price, and short build-up means an increase in Open Interest(OI) along with a decrease in price.

Source: Upstox and NSE.

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