Trade setup for 14 May: Hammer pattern appears on NIFTY50 and BANK NIFTY

Asian markets update 7 am

Indian equities are off to a positive start as the GIFT NIFTY rises 0.3% to cross the 22,200 mark. Other Asian markets are also mixed. Japan's Nikkei 225 is flat while Hong Kong's Hang Seng Index is up 0.8%.

U.S. market update

U.S. equities traded in a narrow range and closed the muted session on a mixed note. This comes ahead of the release of inflation data (CPI) later this week, which will shape the outlook for the Federal Reserve's June meeting. The Dow Jones snapped the eight-day winnig streak and fell 0.2% to 39,431, while the S&P 500 closed flat at 5,221. The Nasdaq Composite added 0.2% and closed at 16,388.

NIFTY50

May Futures: 22,201 (▲0.3%)

Open Interest: 4,68,960 (▼0.6%)

After initial volatility, the NIFTY50 recouped losses from the key swing low (21,800) to close above 22,100-mark. Gains in index heavyweights private banks and TCS arrested the fall and provided a cushion.

As highlighted in yesterday's blog, the index fell below the low of the inside candle and dropped to the 21,800 level. However, the NIFTY50 rebounded from the day’s low to form a bullish hammer on the daily chart. As the broader trend of the index is negative, this rebound will be confirmed as a reversal if today's close is above the hammer pattern.

The open interest (OI) data for the 16 May expiry has a significant call OI at 22,500 and 22,300 strikes.On the other hand, the put OI is at 21,500 and 22,000 strikes. Based on options data, traders are expecting NIFTY50 to trade between 21,600 and 22,700.

BANK NIFTY

May Futures: 48,003 (▲0.9%)

Open Interest: 1,52,323 (▼3.7%)

The BANK NIFTY snapped it's eight-day losing streak and recouped all its losses from the 47,000 level and closed above its 50-day moving average. Strength in private banking heavyweights HDFC Bank and ICICI Bank helped the index trim losses.

As mentioned in yesterday's blog, the index closed above the inverted hammer pattern formed on the 9 May, forming a bullish hammer pattern on the daily chart. With the broader trend still weak, traders can keep an eye on the high of the bullish reversal hammer. A close above it will confirm the reversal pattern and a close below it will negate the pattern.

Open interest data for the 15 May expiry shows a significant call base at the 48,000 strike and a put base at the 47,000 strike. Moreover, the significant OI of both the call and put options was also placed at 47,500 - suggesting that traders are expecting BANK NIFTY to trade in the 47,000-48,300 range.

FII-DII activity

Stock scanner

Long build-up: Siemens, Dr. Lal PathLabs, Cipla, Metropolis, Astral and AB Capital

Short build-up: Tata Motors, Piramal Enterprises, SRF and Dixon Technologies

Under F&O ban: Balrampur Chini, Canara Bank, GMR Infra, Hindustan Copper, Idea, Piramal Enterprises, Punjab National Bank, Steel Authority of India (SAIL) and Zee Entertainment

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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