The stock of Bajaj Finance (₹7,711.15) is ruling at a crucial level. It finds an immediate support at ₹7,618 and the major one at ₹7,390. A close below the latter will alter current bullish view on the stock.
On the other hand, Bajaj Finance finds its nearest immediate resistance at ₹7,875. A close above ₹7,980 will trigger a fresh rally on the stock that can lift it to new heights.
F&O pointers: Bajaj Finance January futures closed at ₹7,732.55 against the spot price of ₹7,711.15. Though open interests moved from 33.52 lakh shares on December 26 to 51.71 lakh shares in the last few days, the counter shed open positions.
This signal unwinding of long positions due to profit taking. Option trading indicates that the stock could move in ₹7,000-8,000 range.
Strategy: Consider a bull-call spread on Bajaj Finance. This can be initiated by selling 7,800-strike call while simultaneously buying 7,700-strike call. As these options closed with a premium of ₹136.35 and ₹181.85 respectively, this strategy would cost traders ₹45.5/contract (or ₹5,687.5 for a lot size of 125).
The premium paid (₹5,687.50) would be the maximum loss one can suffer and that can happen if Bajaj Finance fails to hold on to ₹7,700.
On the other hand, a profit of ₹6,812.50 is possible if Bajaj Finance manages to move past ₹7,800. We advise traders to hold the position for at least two weeks and can be reviewed later.
Follow-up: Hindalco moved on expected lines. Investors can consider exiting the strategy (bear-put spread).
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading