The stock of Hindustan Unilever Ltd (HUL) (₹2,452.60) is ruling at a crucial level. It finds an immediate support at ₹2,425. A conclusive close below this can weaken the stock to ₹2,335. A close below ₹2,335 will change the medium-term outlook negative.
On the other hand, HUL finds an immediate resistance at ₹2,635. A close above this will lift the stock towards ₹2,722. A rally above ₹2,750 will change even the long-term outlook positive for HUL. We expect the stock to move in a narrow range with a positive bias.
F&O pointers: HUL February futures closed at ₹2,468.25 against the spot close of ₹2,452.60, a premium of nearly ₹16. This indicates the existence of long positions. Besides, open interests moved from 20 lakh shares to one crore shares in the last 10 days. Option trading indicates that it could move in the ₹2,300-2,600 range.
Strategy: Consider a bull-call spread on HUL. This can be initiated by selling 2,500-call and simultaneously buying the 2,460-strike call. These options closed with a premium of ₹28.20 and ₹45.95 respectively.
As the market lot is 300 shares, this strategy would cost ₹5,325. This would be the maximum loss if the stock failed to hold ₹2,460. But a profit of ₹6,675 is possible if the stock closes at or above ₹2,500. Hold the position for at least two weeks, if the maximum profit is not achieved before that.
Follow-up: We advised buying the 1700-call on Infosys. Traders can hold for one more week for the recommended target of ₹60.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.