Can I buy the Tata Elxsi June 7000-call option? – T C Rajashegaran
Tata Elxsi (₹6,473): The stock has been in uptrend since April 21 when it rebounded from ₹4,800. It marked a fresh four-month high of ₹6,535 on May 29 before moderating to the current level of ₹6,460.
Notably, the price action since early last week shows loss in upward momentum and the stock has largely remained sideways. That is, it has been oscillating between ₹6,360 and ₹6,535. However, the uptrend has not been invalidated.
The recent consolidation can be temporary and this can even lead to further correction in stock price, probably to ₹6,240 and ₹6,100, which are notable support levels. But broadly, the bull trend will remain true and corrections can be opportunities to go long.
That said, in case the stock rallies from the current level itself and breaks out of ₹6,535, it can rally to ₹6,800 quickly. Resistance above ₹6,800 is at ₹7,000.
Considering the above factors, you can consider buying call options on Tata Elxsi as it retains the uptrend. However, rather than buying at the current level, you can go long on calls either after a fresh breakout of ₹6,535 or after a decline to the ₹6,240-6,100 price band.
We suggest buying at-the-money options. That is, in the event of a breakout of ₹6,535, you may consider buying 6500-call; in case the stock drops to ₹6,200, you can prefer 6200-call. If either of these events occur in the final week of June expiry, we recommend considering July call options.
Post initiating long positions on call options, if the stock price falls below the support at ₹6,100, exit all the longs as this can lead to further drop in price. Nearest support below ₹6,100 can be spotted at ₹5,850.
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