The stock of Larsen & Toubro has been active in volumes for the last week and has given almost 8 per cent return in the last month. Do you think this will sustain during this month? I have an open position on 2000-strike call option bought at ₹20.25

Raunaq Gupta

The stock of Larsen & Toubro (₹1,949.75) has been rallying since the final week of June this month. However, the up-move seems to be losing traction currently. Even during the last week, the scrip was moving in a range of ₹1,935-1,985. Notably, ₹2,000 is a resistance as well.

The weakness is also indicated by the daily RSI and the daily MACD as they are showing bearish divergence, hinting at a possible trend reversal. If not a bearish trend reversal, there could at least be a corrective decline. Yet, the overall trend is bullish. So, we expect the stock to see a dip to ₹1,900 and then resume the rally which will eventually take the stock above ₹2,000. Such a breakout will open the door for a rally to ₹2,080.

Since you are holding a call option and there is a chance for a price correction from the current level, we suggest exiting the option now. The 2000-strike call option closed at ₹22.95 on Friday.

As mentioned earlier, the broader trend is bullish.

So, after liquidating you can wait for the price to dip to ₹1,900 and then buy the call option afresh. Alternatively, you can buy a call option after the stock breaks out of ₹2,000.

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