The stock of Tech Mahindra (₹1,288.15) has been moving sideways between ₹1,400 and ₹1,100 for quite some time. The stock finds an immediate support at ₹1,259. A close below ₹1,228 will change the short-term outlook to negative. It finds an immediate resistance at ₹1,320. A close above ₹1,351 will trigger a fresh rally towards ₹1,407. We expect Tech Mahindra to move in a narrow band with upward bias.
F&O pointers: Tech Mahindra March futures closed at ₹1,291.60 against the spot close of ₹1,288.15. The premium is narrowing, signalling unwinding of long positions. Option trading indicates that the stock could move between ₹1,200 and ₹1,400.
Strategy: Consider a bull-call spread on Tech Mahindra. Initiate by selling 1300-call and simultaneously buying the 1290-call. These options closed with a premium of ₹30.30 and ₹34.90 respectively. Hence, the strategy will cost traders ₹2,760 (market lot: 600 shares), which would be the maximum loss. This will happen if the stock closes at or below ₹1,290.
On the other hand, a profit of ₹3,240 is possible if Tech Mahindra rises above ₹1,300. We advise traders to hold the position till expiry if the profit is not achieved before.
Aggressive traders can consider going long on Tech Mahindra futures. This strategy is strictly for traders who can withstand wild swings and can meet margin commitments. Place stop-loss at ₹1,259 for an initial target of ₹1,305 and a final target of ₹1,322. Stop-loss can be shifted to ₹1,275 if the stock opens on a positive note. Then alter it to ₹1,288 on rise above ₹1,295. If the stock opens on a negative note, traders can stay away from this strategy.
Follow-up: Hold IEX bull-call spread strategy for one more week and can be reviewed later.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading