Stocks

Future perfect | Consider long on Axis Bank

KS Badri Narayanan December 16 | Updated on December 16, 2019 Published on December 16, 2019

File photo   -  Reuters

The outlook for the stock of Axis Bank (Rs 752.25) is positive. It finds an immediate support at Rs 715 and a crucial one at Rs 660. If the current trend sustains and if the stock rules above Rs 732, it has the potential to reach Rs 1,020.

We expect the stock to maintain the current bullish trend.

F&O Pointers

Axis Bank December futures has been seeing unwinding of open interest in the last four days. From a high of about 5.6 crore shares, open interest fell to 5.20 crore shares. However, January contract has added open positions, signalling a healthy rollover by traders.

Option trading indicates a support at Rs 720.

Strategy

Traders can consider going long on Axis Bank futures with a stop loss at Rs 732. The stop-loss can be shifted to Rs 750 if the stock opens on positive note and stays well above this mark on Monday. Investors, who have patience with risk taking ability, can rollover positions and aim for a target of Rs 815 initially.

Alternatively, traders could consider a calendar bull-call spread strategy. This can be done by selling RS 750-call of this month and simultaneously buying the same option of next month. They closed with a premium of Rs 16.65 and Rs 34.65 respectively. This will cost traders Rs 18/contract or Rs 21,600, as the market lot is 1,200 shares.

A maximum loss is the premium paid (Rs 18), profit potentials are unlimited. If the stock closes at or below Rs 750, loss will occur. On the other hand, a close above Rs 768 will start turn the position positive.
We advice traders to hold it for at least two weeks.

Published on December 16, 2019
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