Trade Setup for Sept 4: BANK NIFTY reclaims 50 DMA, will it sustain the gains?

Asian markets update at 7 am

Asian markets are trading in the red after a negative handover from Wall Street. The Gift Nifty is down nearly 1%, indicating a gap down start for Indian equities today. Meanwhile, the Nikkei 225 is leading the losses in Asia, down over 3%, while Hong Kong's Hang Seng Index is down over 1%.

U.S. market update

• Dow Jones: 40,936 (▼1.5%)
• S&P 500: 5,528 (▼2.1%)
• Nasdaq Composite: 17,136 (▼3.2%)

U.S. indices started the month of September on a negative note, led by the decline in technology stocks. The sharp sell-off was led by chip stocks, with Nvidia falling over 9% along with other stocks.

The catalyst for the fall was the manufacturing data, with the PMI reading for August coming in at 47. The reading was better than July, but below expectations of 47.5. This was the fifth consecutive reading for the manufacturing PMI below 50, which indicates a contraction in manufacturing activity.

NIFTY50

• September Futures: 25,354 (▲0.0%)
• Open Interest: 6,02,335 (▲0.7%)

The NIFTY50 index ended the day flat in a range-bound session on Tuesday, extending the winning streak to the 14th session. The index formed a inside candle on the daily chart, indicating a pause and consolidation at current levels.

The technical structure of the NIFTY50 remains positive and the index has immediate support at 25,150 and 25,200. For upside momentum, traders can look to the high of the 2 August candle, which is around 25,350. A break above or below this small area will provide traders with further directional clues. Meanwhile, key support for the index is around the 25,000 level. If the index falls below this level on a closing basis, short-term weakness can be expected.

The open interest positioning of the 5 September expiry broadly remained unchanged. The index has highest call OI at 25,300 and 25,500 strikes, hinting at resistance around these zones. Conversely, the put base remained intact at 25,000 and 24,800 strikes, suggesting support around these levels.

BANK NIFTY

• September Futures: 51,834 (▲0.4%)
• Open Interest: 1,57,381 (▼0.0%)

The BANK NIFTY also extended its winning streak for the fourth consecutive day and regained its 50-day moving average. The index regained the 51,500 level after a month and formed a bullish candle on the daily chart, closing above the previous day's and week's highs.

As you can see on the chart below, the index has immediate support around the 51,400 and 50,000 zones. Unless the index falls below this zone on an intraday or closing basis, the index could extend its bullish momentum to 50,800 and 52,000 levels.

Meanwhile, after the breakout towards the end of the session, the index has a small support around 51,500 zone.If the index holds this level on an intra-day basis, it may extend the bullish momentum. However, if the index slips below this level on the 15-minute chart and sustains, the trend may turn range-bound with 52,000 and 51,800 zones acting as resistance.

The positioning of the open interest indicates range-bound activity around 51,500 strikes, with highest call and put base at this strike. Additionally, the index has significant put open interest at 51,000 and 52,000 strikes making these as strong support and resistance zones for today’s expiry.

FII-DII activity

Stock scanner

Under F&O ban: Aditya Birla Fashion and Retail, Balrampur Chini Mills and Hindustan Copper

Added under F&O ban: Aditya Birla Fashion and Retail

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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