Trade setup for 3 May: BANK NIFTY eyes follow-through after consolidation
Upstox
4 min read • Updated: May 3, 2024, 8:14 AM
Summary
BANK NIFTY is currently at crucial stage as the index formed a shooting star candle on 30 April and confirmed the bearish reversal pattern on 2 May. Experts believe if the index fails to provide the follow-through of the breakout, it may slip back into the consolidation zone.
Asian markets update 7 am
Indian equities, as indicated by the GIFT NIFTY (+0.4%), are looking at a gap up start after a positive handover from Wall Street. Meanwhile, markets in Japan and China are closed for a public holiday, while Hong Kong's Hang Seng Index is up almost 2%.
U.S. market update
U.S. stocks opened higher and continued to rise throughout the day as investors shrugged off the likelihood of an interest rate hike following the Fed's decision. Investor focus will now shift to monthly jobs data and Apple's Q1 earnings, which were released after hours and beat estimates.
The S&P 500 rose 0.9% to 5,064, while the Dow Jones Indutrial Average gained 0.8% and ended the day at 38,225. The tech-heavy Nasdaq Composite jumped 1.5% and ended at 15,840.
NIFTY50
May Futures: 22,773 (▲0.2%)
Open Interest: 4,41,900 (▲2.5%)
The NIFTY50 traded in a narrow range on the weekly F&O contracts expiry and closed flat. After a lower start, the index consolidated its gains above 22,600, negating the shooting star pattern that formed on the 30 April.
On the daily chart, the index is currently trading above the 20 and 50 day moving averages (DMAs) with immediate support between 22,400 and 22,450 zone. On the flip side, the resistance remains at 22,800.
Initial open interest for the 9 May expiry remains scattered, with the maximum call and put base at the 22,700 strike, suggesting range-bound activity. However, it is important to note that the India VIX, the volatility index, has risen by 23% this week - highlighting the caution that investors should be taking.
BANK NIFTY
May Futures: 49,388 (▼0.1%)
Open Interest: 1,45,575 (▼4.0%)
The BANK NIFTY consolidated its gains after breaking above 49,000, its previous all-time high, on 29 April and retested the breakout level. However, on the 2 May, the index formed another negative candle on the daily chart.
The BANK NIFTY is currently at a crucial stage as the index formed a shooting star candle on the 30 April and confirmed the bearish reversal pattern on the 2 May. Experts believe that if the index fails to follow through on the breakout, it could slip back into the consolidation zone. On the other hand, if the index moves above the 49,500 level, it would negate the shooting star pattern.
The open interest (OI) data for the 8 May expiry has a maximum call base at the 49,500 and 50,000 strikes. On the other hand, put OI has significant base at 49,000 and 49,500 strikes. Based on the options data, traders expect BANK NIFTY to tarde between 48,500 and 50,000.
FII-DII activity
After two days of being net buyers, the Foreign Institutional Investors (FIIs) turned net sellers and sold shares worth ₹964 crore. On the other hand, the Domestic Institutional Investors (DIIs) remained net buyers and bought shares worth ₹1,352 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: Cholamandalam Investment, REC, IndiaMART InterMESH, Hindustan Petroleum, Trent and GMR Infra
Short build-up: Kotak Mahindra Bank, Godrej Properties, IGL, Astral and Coforge
Under F&O ban: Aditya Birla Fashion and Retail, 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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