Trade setup for 8 May: BANK NIFTY slips below 20-DMA, eyes support at 47,500
Upstox
4 min read • Updated: May 8, 2024, 8:51 AM
Summary
The BANK NIFTY began a sharp bearish move as soon as it broke below the inside bar candlestick formed on the 6 May. For today's expiry, the index has immediate support at 47,500, which also coincides with zone of index's 50 DMA. On the other hand, resistance remains at 49,200.
Asian markets update 7 am
The GIFT NIFTY is trading flat (+0.03%), indicating a subdued start for the NIFTY50 today. Meanwhile, Asian markets are trading mixed. Japan's Nikkei 225 is down 0.8%, while Hong Kong's Hang Seng Index is up 0.4%.
U.S. market update
U.S. equities ended Tuesday's session on a mixed note amid growing hopes for two interest rate cuts this year. Meanwhile, Disney's Q1 earnings beat estimates, but the stock fell more than 9% after the company forecast weaker results for the current quarter. In addition, the Minneapolis Fed chief said that the U.S. Federal Reserve will keep interest rates on hold for an extended period of time.
The Dow Jones and S&P 500 rose 0.1% and closed the day at 38,884 and 5,187 respectively. The tech-heavy Nasdaq Composite slipped 0.1% to 16,332.
NIFTY50
May Futures: 22,381 (▼0.7%)
Open Interest: 4,24,907 (▼3.8%)
Despite a positive lead from global indices, the NIFTY50 failed to hold on to its opening gains and closed in the red for the third consecutive day. Profit booking was seen across sectors, except for defensive stocks such as FMCG and IT.
On the daily chart, the NIFTY50 closed below its two-day low. The previous two candles were significant as a bearish engulfing candle was formed on the 3 May, followed by an inside bar candle on the 6 May. As highlighted in yesterday's blog, a break below the inside bar resulted in a sharp downward move and the index found support near its 50-day moving average (DMA). Looking ahead, price action near the immediate support zone of 22,100-22,150 and the 50 DMA will provide traders further directional clues.
Open interest (OI) data for the 9 May expiry shows significant call OI at the 22,500 and 22,800 strikes. On the other hand, put OI is at 22,000 and 21,800 strikes. Based on the open interest, traders expect the NIFTY50 to trade between 21,850 and 22,550.
BANK NIFTY
May Futures: 48,349 (▼1.4%)
Open Interest: 1,45,553 (▲2.39%)
The BANK NIFTY also extended its losses and closed Tuesday's session below the lows of the previous two days, indicating weakness. The index also closed below its 20-day moving average and formed a negative candle on the daily chart.
Similarly to the NIFTY50, the BANK NIFTY began a sharp bearish move as soon as it broke below the inside bar candlestick formed on the 6 May. For today's expiry, the BANK NIFTY has immediate support at 47,500, which also coincides with zone of index's 50 DMA. On the other hand, resistance remains at 49,200.
Open interest data for today's expiry shows significant call OI at 49,000 and 49,500 strikes. Put OI was seen at 48,000 and 47,500 strikes. Based on options data, traders expect the BANK NIFTY to trade between 47,500 and 49,200.
FII-DII activity
The Foreign Institutional Investors (FIIs) remained net sellers for the fourth day in a row and sold shares worth ₹3,668 crore, while the Domestic Institutional Investors (DIIs) were net buyers and bought shares worth ₹2,304 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: Marico, Godrej Consumers and Britannia
Short build-up: SRF, Lupin, Bajaj-Auto, Tata Motors and Punjab National Bank
Under F&O ban: Aditya Birla Fashion and Retail, Balrampur Chini, Biocon, GMR Infra, Idea , Punjab National Bank, Steel Authority of India (SAIL) and Zee Entertainment
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.
Disclaimer: Derivatives trading must be done only by traders who fully understand the risks associated with them and strictly apply risk mechanisms like stop-losses. The information is only for consumption by the client and such material should not be redistributed. We do not recommend any particular stock, securities and strategies for trading. The securities quoted are exemplary and are not recommendatory. The stock names mentioned in this article are purely for showing how to do analysis. Take your own decision before investing.