The Hindu Business Line : Small reversal likely in ITC, HPCL

THE following strategies are based on Thursday's trading in the derivatives segment on the NSE. These strategies are constructed to take advantage of small reversal in futures prices. The 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 short position after the price breaks below the 5-minute low.

Likewise, if the futures price gaps up, the long position can be initiated after the price breaks above the 5-minute high. If the futures price gaps up in the case of a short-sell recommendation 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.

For long positions, the stop-loss should be placed at day's low if that price is lower than the stop-loss recommended below.

Option-based strategies on these positions will not be optimal because the price targets are not far away from the recommended entry levels.

ITC: Sell July futures if it trades below 1625. The downside target is 1616-1610. Place the protective stop at 1633. The open interest position is about 10 per cent of the market-wide limit. The minimum order size is 150 units.

HPCL: Buy July futures if it trades above 307. The upside target is 309-311. Place the protective stop at 305. The open interest position is about 20 per cent of the market-wide limit. The minimum order size is 650 units.

Colgate: Sell July futures if it trades above 248.50. The downside target is 246-245. Place the protective stop at 252. The open interest position is about 20 per cent of the market-wide limit. The minimum order size is 1050 units.

Satyam Computer: Sell July futures if it trades below 502. The downside target is 497-495. Place the protective stop at 507. The open interest position is about 10 per cent of the market-wide limit. The minimum order size is 600 units.

Aurobindo Pharma: Buy July futures if it trades above 306. The upside target is 310-312. Place the protective stop at 302. The open interest position is about 20 per cent of the market-wide limit. 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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