Trade setup for 5 August: Will BANK NIFTY hold the 50-DMA amid global jitters?

Asian markets update at 7 am

After a negative handover from Wall Street, the GIFT NIFTY is trading around the 24,400 mark, down 1.4% from Friday's close, signalling a weak start for Indian equities today. The other Asian markets are trading lower. Japan’s Nikkei 225 is down 3.2%, while Hong Kong’s Hang Seng index is down 1.1%.

U.S. market update

• Dow Jones: 39,737 (▼1.5%)
• S&P 500: 5,346 (▼1.8%)
• Nasdaq Composite: 17,194 (▼2.4%)

U.S. market extended the losing streak on Friday as weaker-than-expected July jobs reports ignited recession worries. The unemployment rose to 4%, highest since October 2021. Meanwhile, the jobs grew by 1,14,000, below the expectation of 1,85,000.

The latest data has shifted market expectations, with traders pricing in three rate cuts this year - in September, November and December. In particular, there's a growing consensus for a 50bps cut in September.

NIFTY50

• August Futures: 24,711 (▼2.3%)
• Open Interest: 6,08,665 (▼2.8%)

Amid negative global cues, the NIFTY50 started the Friday’s session on a weak note, ending its five-day winning streak. The index ended below the crucial support zonze of 24,800 and 24,850 and formed a negative candle on the daily chart.

As you can see on the chart below, the index has immediate support around its 20-day moving average (DMA), which also coincides with the Budget Day high. Unless the NIFTY50 closes below the 20 DMA, the trend could remain range-bound with immediate resistance around the 25,000 and 25,100 zones. However, a break of 24,500 on a closing basis will signal further weakness to the 50 DMA.

On the options front, the open interest build-up for the 8 August expiry has highest call base at 25,000 strike. This level will act as resistance for the index during this week’s expiry. On the other hand, the put base was visible at 24,000 zone, pointing at support in this zone.

BANK NIFTY

• August Futures: 51,429 (▼0.6%)
• Open Interest: 1,74,364 (▲4.6%)

The BANK NIFTY closed in the red on Friday and took support at its 50-day moving average and formed an inverted hammer candle on the daily chart at its key support level. An inverted hammer is a bullish reversal pattern that forms at the end of a downtrend, signalling a potential reversal. The pattern has a small body with a longer upwick, indicating that buyers have attempted to push the price higher. If followed by a bullish confirmation, the sentiment may shift from bearish to bullish. bearish to bullish.

On the daily chart, the BANK NIFTY is consolidating between its 20- and 50-day moving averages (DMAs) for the past five trading sessions. The index has been in contraction territory and has protected its 50 DMA on a closing basis. A close below or above these two important DMAs will provide traders with further directional clues.

It is important to note that the BANK NIFTY is consolidating in a wider range between 52,500 and 50,400. Traders can use non-directional strategies to maintain this broader range and closely monitor the break of the 20 or 50 DMA for further directional cues.

FII-DII activity

Stock scanner

Under F&O ban: Aditya Birla Capital, Birlasoft, Chambal Fertilisers, Gujarat Narmada Valley Fertilizers & Chemicals (GNFC), Granules India, India Cements, IndiaMART InterMESH and RBL Bank

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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