Trade setup for May 7: Top 15 things to know before the opening bell

Nifty Trade Setup

The Nifty 50 witnessed selling pressure amid rangebound trading and caution due to India-Pakistan tensions on May 6. Market participants also await the outcome of the US Federal Reserve meeting scheduled for May 7. The gradually rising India VIX signals short-term caution, but overall, the trend remains strong as the index continues to trade well above all key EMAs. If the index breaks 24,300 (the previous day's low), the next support levels lie at 24,200, followed by 24,050 (the 200-day SMA). On the higher side, the 24,500–24,600 zone is the key hurdle area; sustaining above this zone could drive the index towards 24,800–24,900, experts said.

Here are 15 data points we have collated to help you spot profitable trades:

1) Key Levels For The Nifty 50 (24,380)

Resistance based on pivot points: 24,475, 24,517, and 24,585

Support based on pivot points: 24,339, 24,297, and 24,229

Special Formation: The Nifty 50 formed a bearish candlestick pattern on the daily chart, but remained within Friday's trading range. The index continues to trade well above all key moving averages (20, 50, and 200-day EMAs), with all EMAs trending upward. The upper band of the Bollinger Bands also expanded further, indicating increased volatility. The RSI stands at 64.50, having tilted slightly downward, but it remains in the upper band, suggesting strength. The MACD (Moving Average Convergence Divergence) showed a slight downward bend, yet remains well above the zero line, indicating that the overall trend has not changed and remains positive.

2) Key Levels For The Bank Nifty (54,271)

Resistance based on pivot points: 54,824, 55,028, and 55,358

Support based on pivot points: 54,164, 53,960, and 53,630

Resistance based on Fibonacci retracement: 56,255, 58,572

Support based on Fibonacci retracement: 54,147, 52,922

Special Formation: The Bank Nifty formed a long bearish candle on the daily timeframe, indicating a negative trend, although it still trades well above all key EMAs. The RSI is at 58.68, having bent downward, reflecting some loss of momentum. The MACD has shown a negative crossover, though it continues to hold above the zero line, which suggests that the broader trend is not yet decisively bearish.

3) Nifty Call Options Data

According to the weekly options data, the 24,500 strike holds the maximum Call open interest (with 1.79 crore contracts). This level can act as a key resistance for the Nifty in the short term. It was followed by the 24,400 strike (1.18 crore contracts), and the 25,000 strike (1.06 crore contracts).

Maximum Call writing was observed at the 24,400 strike, which saw an addition of 63.58 lakh contracts, followed by the 24,500 and 24,450 strikes, which added 52.54 lakh and 40.06 lakh contracts, respectively. The maximum Call unwinding was seen at the 24,800 strike, which shed 12.87 lakh contracts, followed by the 25,300 and 24,700 strikes, which shed 10.09 lakh and 8.3 lakh contracts, respectively.

4) Nifty Put Options Data

On the Put side, the maximum Put open interest was seen at the 24,000 strike (with 99.65 lakh contracts), which can act as a key support level for the Nifty. It was followed by the 24,400 strike (92.93 lakh contracts) and the 24,300 strike (77.84 lakh contracts).

The maximum Put writing was placed at the 23,500 strike, which saw an addition of 16.61 lakh contracts, followed by the 24,200 and 24,400 strikes, which added 12.58 lakh and 12.33 lakh contracts, respectively. The Put unwinding was seen at the 24,500 strike, which shed 23.88 lakh contracts, followed by the 24,600 and 23,800 strikes which shed 5.26 lakh and 5.05 lakh contracts, respectively.

5) Bank Nifty Call Options Data

According to the monthly options data, the 55,500 strike holds the maximum Call open interest, with 10.45 lakh contracts. This can act as a key resistance level for the index in the short term. It was followed by the 55,000 strike (10.12 lakh contracts) and the 56,000 strike (8.8 lakh contracts).

Maximum Call writing was visible at the 54,500 strike (with the addition of 2.23 lakh contracts), followed by the 55,000 strike (1.51 lakh contracts) and the 53,500 strike (1.29 lakh contracts). The maximum Call unwinding was seen at the 53,000 strike, which shed 1.03 lakh contracts, followed by the 55,300 and 55,100 strikes, which shed 46,500 and 40,740 contracts, respectively.

6) Bank Nifty Put Options Data

On the Put side, the maximum Put open interest was seen at the 53,500 strike (with 13.97 lakh contracts), which can act as a key support level for the index. This was followed by the 53,000 strike (13.71 lakh contracts) and the 54,000 strike (11.05 lakh contracts).

The maximum Put writing was observed at the 53,500 strike (which added 3.9 lakh contracts), followed by the 54,400 strike (73,590 contracts) and the 54,300 strike (64,680 contracts). The maximum Put unwinding was seen at the 53,000 strike, which shed 2.64 lakh contracts, followed by the 55,000 and 54,900 strikes, which shed 1.84 lakh and 87,360 contracts, respectively.

7) Funds Flow (Rs crore)

8) Put-Call Ratio

The Nifty Put-Call ratio (PCR), which indicates the mood of the market, fell to 0.92 on May 6, from 0.97 in the previous session.

The increasing PCR, or being higher than 0.7 or surpassing 1, means traders are selling more Put options than Call options, which generally indicates the firming up of a bullish sentiment in the market. If the ratio falls below 0.7 or moves towards 0.5, then it indicates selling in Calls is higher than selling in Puts, reflecting a bearish mood in the market.

9) India VIX

The India VIX, often referred to as the fear index, continued its upward journey for the fifth consecutive session, reaching the 19 mark, up 3.59 percent on Tuesday. This rise signals growing caution among bulls.

10) Long Build-up (13 Stocks)

A long build-up was seen in 13 stocks. An increase in open interest (OI) and price indicates a build-up of long positions.

11) Long Unwinding (86 Stocks)

86 stocks saw a decline in open interest (OI) along with a fall in price, indicating long unwinding.

12) Short Build-up (102 Stocks)

102 stocks saw an increase in OI along with a fall in price, indicating a build-up of short positions.

13) Short-Covering (18 Stocks)

18 stocks saw short-covering, meaning a decrease in OI, along with a price increase.

14) High Delivery Trades

Here are the stocks that saw a high share of delivery trades. A high share of delivery reflects investing (as opposed to trading) interest in a stock.

15) Stocks Under F&O Ban

Securities banned under the F&O segment include companies where derivative contracts cross 95 percent of the market-wide position limit.

Stocks added to F&O ban: Central Depository Services

Stocks retained in F&O ban: Manappuram Finance, RBL Bank

Stocks removed from F&O ban: Nil