F&O Tracker: Support zones tested as bulls take a breather

Nifty 50 (24,008) and Nifty Bank (53,595) depreciated over the last week and posted a loss of 1.4 per cent and 2.8 per cent respectively. Below is an analysis of the derivatives data of both indices and trade recommendations based on them.

Nifty 50

The May Nifty futures (24,066) lost 1.4 per cent last week. In this period, the Open Interest (OI) dropped by a slight 2 per cent and it stood at 126.2 lakh contracts on Friday. This denotes that some longs made an exit. 

The Put Call Ratio (PCR) of the weekly expiry was at 0.7 whereas the same for the May monthly series stood at 1.2 on Friday.  This shows short-term weakness whereas the broader bias is bullish.

In line with this, the chart shows that although Nifty futures (May) dropped last week, it remains above key support level at 24,000, where the 20-day moving average coincides.

A recovery on the back of this base can lift the contract to 24,800 and 25,000, which are the notable resistance levels. However, a breach of 24,000 can drag the contract to 23,700. As it stands, a fall below this is unlikely.

But if 23,700 gives up, the outlook for Nifty futures (May) can turn bearish and can see a fall to 22,900 and 22,000. Nevertheless, as the prevailing price action indicates, the contract retains the positive bias.

Strategy: Last week, we suggested going long at 24,000. Retain this trade and add longs on a dip to 23,700. Maintain initial stop-loss at 23,500. When the contract rallies to 24,400, revise the stop-loss to 24,150. Lift the stop-loss further up to 24,250 when the contract hits 24,600. Exit at 24,800.

As an alternative, we suggested buying 24500-call (May) (₹201.80) at ₹205. Hold on to this and can buy more if the premium moderates to ₹150. Stop-loss can be at ₹100. When the premium rises to ₹350, revise the stop-loss to ₹250. Book profits at ₹430.

Nifty Bank

The May Nifty Bank futures (53,732) was down 2.7 per cent last week. The OI, too, dropped along with the contract; it decreased by 20 per cent over the past week and stood at 18 lakh contracts on Friday. This indicates long unwinding, like in Nifty futures.

The PCR of May month Nifty Bank options dropped from 0.9 on May 2 to 0.7 on May 9 because of relatively more call option selling during this period. This is a bearish sign as traders sell calls when they hold a negative outlook.

While the futures and options numbers suggest a weak outlook, the chart of Nifty Bank futures (May) shows that it is not all that negative as there is a support ahead at 53,600. Below this, there is a support zone between 52,000 and 52,500. 

If the contract rebounds from the current level it can rally to 57,000 and 58,000. Note that 56,000 can resist the bulls but might not be able to hold them for longer. 

Strategy: We recommended buying Nifty Bank futures (May) at 53,700. Retain this trade with target and stop-loss at 57,000 and 53,150 respectively.

Instead of going long on futures, traders who had bought 55500-call (May) (₹298.90) can also retain the position. The recommended purchase price was ₹400 and the order would have triggered on May 7. Stop-loss can be ₹150. When the price of the option goes up to ₹750, raise the stop-loss to ₹500. Exit at ₹1,000.

Published on May 10, 2025