The Hindu Business Line : Outlook may turn negative for Dr Reddy's Labs

The strategies on Bajaj Auto and Titan Industries are constructed to take advantage of small reversals in futures prices. These positions may run counter to the primary trend. Protective stops are, hence, important. If futures price gaps down on Friday so as to trade 2-3 points below the recommended entry price, traders should enter the position after the price breaks below the 5-minute low. Likewise, if the futures price gaps up and then triggers the recommended entry level, the protective stop should be placed at day's high at the time the position is initiated, if that price is higher than the stop-loss level recommended below.

Note that the recommendation on Bajaj Auto and Titan Industries are valid for only intra-day trade. Dr Reddy's is, however, a position trade. The target level is, hence, far away from the recommended entry level.

Bajaj Auto: Sell May futures if it trades below 1,223. The downside target range is 1,212-1,205. Initiate the position with protective stop at 1,230. The open interest position is about 15 per cent of the market-wide limit. The minimum order size is 200 units.

Titan Industries: Sell May futures if it trades below 296. The downside target range is 291-289. Initiate the position with protective stop at 300. The minimum order size is 800 units.

Dr Reddy's Labs: The June futures closed at 681.30. The outlook may turn negative if the June contract trades below 680. The downside target range is 651-647.

Sell June futures after it trades below 680. Initiate the position with protective stop at 690. Trail the stop to control the upside risk. The margin on the futures position is approximately 16 per cent of the contract value. The minimum order size is 200 units. The open interest position is about 30 per cent of the market-wide limit.

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

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