Trade Setup for May 20: Key Market Indicators and Insights to Watch

Nifty 50 Fails to Hold Gains as Profit Booking Takes Over

The Nifty 50 ended the day slightly lower on May 19, erasing previous gains and closing within the 23,300–23,800 range for the past few sessions. Despite the decline, the overall sentiment remains bearish, with negative crossovers in momentum indicators and the index continuing to trade below all key moving averages. This signals caution amid range-bound trading.

Key Levels and Technical Analysis

The Nifty 50's key levels are as follows:

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The index formed a small bearish candle with an upper wick on Tuesday, remaining within the previous week's range and indicating hesitation and profit booking at higher levels amid consolidation. The Nifty 50 stayed below the 38.2 percent Fibonacci retracement level of both the April rally and the correction from the February high to the April low, while continuing to trade below all key moving averages, indicating a bearish bias.

Bank Nifty Fails to Gain Momentum

The Bank Nifty also remained in a consolidative phase, forming a small-bodied bearish candle with an upper shadow on the daily timeframe, indicating pressure at higher levels. The banking index declined 0.24 percent and remained below the 50 percent Fibonacci retracement level of the April rally, indicating a bearish bias. Additionally, the index traded below all key moving averages, all of which continued to trend downward.

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Options Data Analysis

The maximum Call open interest for the Nifty was seen at the 24,000 strike (83.79 lakh contracts), which can act as a key resistance level for the index in the short term. The maximum Call writing was observed at the 23,700 strike, which added 27.83 lakh contracts, followed by the 24,000 and 24,050 strikes, which added 22.55 lakh and 18 lakh contracts, respectively.

On the Put side, the 23,000 strike holds the maximum Put open interest (72.23 lakh contracts), which can act as a key support level for the Nifty in the short term. The maximum Put writing was placed at the 23,700 strike, which added 18.1 lakh contracts, followed by the 23,300 and 23,200 strikes, which added 16.21 lakh and 11.97 lakh contracts, respectively.

Market Indicators

The Nifty Put-Call ratio (PCR) fell to 1.1 on May 19, from 1.24 compared to the previous session. The increasing PCR indicates selling in Calls is higher than selling in Puts, reflecting a bearish mood in the market.

The fear index, India VIX, declined 4.87 percent to 18.67 but remained within the previous day's range. It is necessary for the VIX to fall decisively below the 18 level for bulls to move into a comfort zone.

Funds Flow and Stocks Analysis

A long build-up was seen in 68 stocks, indicating a build-up of long positions. 71 stocks saw short-covering, meaning a decrease in OI, along with a price increase.

Here are the stocks that saw a high share of delivery trades, reflecting investing interest in a stock.

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: Nil, Stocks retained in F&O ban: Kaynes Technology India, SAIL, Stocks removed from F&O ban: Nil.