Trade Setup for May 21: Key Market Indicators to Watch
Nifty 50 Stages Smart Recovery, but Overall Trend Remains Negative
The Nifty 50 staged a smart recovery of 260 points from its support zone around 23,400 and closed marginally higher on May 20. The formation of higher lows indicated that support has shifted higher. However, momentum indicators signalled weakening bearish momentum.
Key Levels and Formations
The index's overall trend remains negative, but the recovery has opened up new possibilities. If the Nifty 50 extends its recovery, the 23,800 zone is expected to act as a key resistance area. This level coincides with the 20-DEMA and the previous week's high. A convincing move above this level can open the door for 23,900-24,000 (20-SMA and 50-DEMA), which remains a crucial hurdle.
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However, sustaining below 23,800 may keep the market in a consolidative mode, with 23,400 acting as key support. According to experts, this would be a negative sign for the market.
| Index | Resistance | Support |
|---|---|---|
| Nifty 50 | 23,695, 23,764, 23,876 | 23,470, 23,401, 23,289 |
| Bank Nifty | 53,654, 53,844, 54,151 | 53,039, 52,849, 52,542 |
Options Data
The 24,000 strike holds the maximum Call open interest (with 87.97 lakh contracts) for the Nifty 50. This level can act as a key resistance level for the Nifty in the short term. The 23,700 strike (50.92 lakh contracts) and 24,300 strike (45.73 lakh contracts) follow closely.
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For the Bank Nifty, the 55,000 strike holds the maximum Call open interest (with 8.75 lakh contracts). This can act as a key resistance level for the index in the short term.
| Nifty 50 | Call Open Interest | Put Open Interest |
|---|---|---|
| 24,000 | 87.97 lakh | 23,000 |
| 23,700 | 50.92 lakh | 23,500 |
| 24,300 | 45.73 lakh | 23,400 |
Funds Flow and Put-Call Ratio
The Nifty Put-Call ratio (PCR) jumped to 1.24 on May 20, from 1.1 compared to the previous session. This indicates a firming up of a bullish sentiment in the market.
India VIX and Fear Gauge
India VIX slipped 1.26 percent to 18.44 and maintained its downtrend for another session. Falling and sustaining below the 18 zone is necessary for further comfort in the bulls' camp.
F&O Ban
Securities banned under the F&O segment include companies where derivative contracts cross 95 percent of the market-wide position limit. Kaynes Technology India and SAIL are the stocks retained in the F&O ban.
| Stock | Reason for Ban |
|---|---|
| Kaynes Technology India | Derivative contracts exceed 95 percent of market-wide position limit |
| SAIL | Derivative contracts exceed 95 percent of market-wide position limit |
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