Trade setup for 2 May: NIFTY50 stumbles near all-time high, forms shooting star

Asian markets update 7 am

GIFT NIFTY is trading higher (+0.5%) indicating a positive start for the Indian equities today. Meanwhile, other Asian markets remain mixed. Japan’s Nikkei is down 0.3%, while Hong Kong’s Hang Seng index is up 0.2%

U.S. market update

U.S. equities closed mixed on Wednesday after the Federal Reserve kept interest rates steady at a range of 5.25% to 5.50%. Fed Chairman Jerome Powell acknowledged that recent inflation readings had come in higher than expected. He added that it is likely that gaining such confidence will take longer than previously expected.

Meanwhile, the Dow Jones Industrial Average gained 0.2% to close at 37,903, while the S&P 500 slipped 0.3% to 5,018. The Nasdaq Composite lost 0.3% to end the day at 15,605.

NIFTY50

May Futures: 22,718 (▼0.1%)

Open Interest: 4,31,021 (▲0.3%)

The NIFTY50 index hits a fresh all-time high on 30 April but failed to hold on to its gains. The index witnessed selling pressure at higher levels and formed a shooting star candle on the daily chart, indicating a potential bearish reversal.

Going forward, the bullish momentum depends on a breach of 22,800, and a close above this level would negate the bearish reversal signal. Conversely, a close below the Tuesday’s closing price confirms the shooting star pattern.

For today’s expiry, traders should also monitor the price action near the 20-day moving average (DMA), which is placed between 22,400-22,450. A close below 20-DMA, will signal further weakness.

As per the open interest (OI), the significant call base for today’s expiry is present at 22,800 and 22,850 strikes. On the other hand, the put options have formidable base at 22,500 and 22,400 strikes. As per option premiums and open interest, traders are expecting the NIFTY50 to trade between 223,00 and 22,850 levels.

BANK NIFTY

May Futures: 49,450 (▼0.3%)

Open Interest: 1,51,729 (▲4.6%)

The BANK NIFTY further extended its upmove and zoomed closer to 50,000-mark. However, the index witnessed a sharp reversal just shy of 50,000 level and surrendered all its intraday gains.

The index formed a doji candle on the daily chart, indicating indecision among investors. Since doji is a neutral candlestick pattern, a close below or above the price of the doji will provide investors with clear directional clues of the ongoing trend.

The initial open interest for the 8 May expiry highlights significant call OI at 49,500 and 50,000 strikes. On the flip side, put OI is accumulated at 49,500 and 49,000 strikes.

FII-DII activity

In the cash market, both the Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) were net buyers on 30 April. The FIIs bought shares worth ₹1,071 crore, while the DIIs purchased shares worth ₹1,489 crore. To track the ratio of long and short open positions of FIIs in the index, log in to https://pro.upstox.com/ ➡️F&O➡️FII-DII Activity➡️FII Derivatives

Stock scanner

Long build-up: REC, Ashok Leyland, Exide Industries, HDFC AMC, Bank of Baroda and IndiaMART InterMESH

Short build-up: AB Capital, Birlasoft, PI Industries, Coforge and GMR Infra

Under F&O ban: Biocon and Idea

To access a specially curated smartlist of most traded and active stocks, as well as the OI gainers and losers, simply log in: https://pro.upstox.com/ ➡️F&O➡️Options smartlist/Futures smartlist

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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