I have bought Coforge March futures at ₹6,012.80. Should I hold or exit or average? – Palani Shanmugam

Coforge (₹5,715): The stock of Coforge has been on a steady decline over the past month. It fell off the resistance at ₹6,800. Consequently, the Coforge March futures dropped, and it closed at ₹5,544.7 on Wednesday.

On Thursday, it made some recovery and is hovering around ₹5,725. While there is no strong evidence of a bullish reversal at this juncture, the underlying stock has now bounced off a key 200-day moving average support. So, for Coforge futures, there is a strong support at ₹5,500.

However, this does not mean that Coforge futures can recover from here. To rally back to ₹6,000, it has to surpass an intermediate resistance at ₹5,750.

Given the prevailing conditions, you can hold Coforge futures. But we suggest exiting the trade once the contract hits ₹6,000. As there is a good chance for the contract to resume the downtrend after moving up to ₹6,000. Place a stop-loss at ₹5,480 to be prepared if the contract declines from here on the back of the resistance at ₹5,750.

Always remember to place a stop-loss to avoid sharp movement in the opposite direction of your trade. Alternatively, you can buy an out-of-money option (in this trade, a put option) as a hedge so that you can stay protected against the gap-up/down opening.

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