The Hindu Business Line : Trend reversal likely in HPCL

HPCL: The stock closed at Rs 366 in the spot market. The outlook may turn positive if the stock moves above Rs 380. In the event, it could move to Rs 416.

Buy January futures after the stock moves above Rs 380 in the spot market. Initiate the position with spot-market-stop-loss at Rs 362. Traders can alternatively place a protective stop at the day's low at the time the position is initiated. Thereafter, the position has to be traded with trailing stops. The margin on the futures position is approximately 18 per cent of the contract value. The minimum order size is 650 units.

Traders can construct ratio call spread as alternative strategy. This position can be initiated with one long January 370 calls and two short January 420 calls. The position can be set up for a net debit of 5 points. The maximum payoff will be realised if the stock reaches the price target on option expiration. For then, the long call will be deep in-the-money while the short calls will expire worthless. The payoff will be 35-40 points if the stock reaches the price target any time before option expiry.

Bank of India: The stock closed at Rs 75 in the spot market. The outlook may turn positive if the stock moves above Rs 84. In the event, the upside price target will be Rs 101.

Buy January futures after the stock moves above Rs 84 in the spot market. Initiate the position with spot-market-stop-loss at Rs 75. Alternatively, a protective stop can be placed at the day's low at the time the position is initiated. The position has to be traded with trailing stops. Otherwise, the downside risk will be high, as the contract-multiplier is 3,800 units. The margin on the futures position is approximately 25 per cent of the contract value. It is not optimal to set up options position on the stock.

Those with shorter trading horizon can initiate long futures position after the stock moves above Rs 75.25 in the spot market. The upside price target will then be Rs 83. The initial protective stop should be placed at Rs 72. This strategy has to be closed at the end of the third day if the contract is not stopped or profits are not taken within this period.

(The opinion expressed in this column is based on technical analysis. There is risk of loss in trading.)

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