The Hindu Business Line : Short reversal likely in PNB, HDFC futures

The strategies are constructed to take advantage of short reversals in futures prices. The position may run counter to the primary trend. Protective stops are, hence, important.

If futures price gaps up or down on Friday so as to trade 2-3 points above or below the recommended entry price, traders should enter the position after the price breaks above the 5-minute high or low. The position is typically valid for two trading days.

However, considering the high underlying volatility, it is best that the position is closed by end trading Friday. The targets are accordingly placed near the recommended entry price. For this reason, it may not be optimal to set up options-based positions as alternative strategies.

PNB: Buy May futures contract if it trades above 354. The upside target range is 359-363. Initiate the position with protective stop at 350 or at the day's low. The minimum order size is 600 units.

HDFC: Sell May futures contract if it trades below 742.50. The downside target range is 734-731. Place a protective stop at 749 or at the day's high at the time the position is initiated, whichever is higher. The minimum order size is 300 units.

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

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