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B. Venkatesh

THE following strategies are based on Tuesday's trading in the derivatives segment on the NSE. The strategies are constructed to take advantage of small reversals in futures prices. The positions may run counter to the primary trend. Protective stops are, hence, important.

If futures price gaps up on Wednesday so as to trade 2-3 points above the recommended entry price, traders should enter the position after the price breaks above the 5-minute high.

Likewise, if the futures price gaps down and then triggers the recommended entry level, the protective stop should be placed at day's low at the time the position is initiated, which that price is lower than the stop-loss level recommended below.

The position is typically valid for 2-3 trading days. However, considering the high underlying volatility, it is best that the position is closed by end trading on Wednesday. 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.

Tata Tea: Buy May futures if it trades above 532.50. The upside target range is 536-538. Initiate the position with protective stop at 529. The open interest position is about 35 per cent of the contract value. The minimum order size is 550 units.

Reliance Energy: Buy May futures if it trades above 485. The upside target range is 489-492. Initiate the position with protective stop at 480. The open interest position is about 25 per cent of the contract value. The minimum order size is 550 units.

LIC Housing: Buy May futures if it trades above 244. The upside target is 247-248. Initiate the position with protective stop at 240. The open interest position is about 5 per cent of the contract value. The minimum order size is 850 units.

Aurobindo Pharma: Buy May futures if it trades above 286. The upside target range is 289-291. Initiate the position with protective stop at 282. The minimum order size is 700 units.

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

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