The stock of Tata Motors (₹445.9) rules at a crucial level. The stock finds an immediate resistance at ₹471 and the major one at ₹510. A conclusive close above the latter will change the long-term outlook positive. The stock finds an immediate support at ₹405 and a close below that can take it towards ₹388. After moving sideways in recent times, we expect the stock to recover and pursue a bullish path. If that happens, Tata Motors can breach its all-time high of ₹536.
F&O Pointers: Tata Motors witnessed a steady accumulation of open positions since September 1, from 5.62 crore shares to 6.86 crore shares even as the stock price dipped marginally from ₹472 to ₹447 level. Tata Motors September futures closed at ₹447.25, a premium of almost ₹2, signalling the existence of long positions. Option chain indicates a wide range of ₹400-500 for Tata Motors.
Strategy: We advise traders to consider buying 460-strike call on Tata Motors. This option closed with a premium of ₹10.50. As the market lot is 1,450 shares per contract, the outflow will be ₹14,996.50, which will be the maximum loss one can suffer. This will happen if Tata Motors fails to move past ₹460 on expiry. The break-even price is ₹470.50.
We advise traders to exit the position if the call premium declines to ₹5.50 (or at a loss of ₹7,125). If Tata Motors opens positive and the premium rises to ₹12.50, shift the stop-loss to ₹11.50 (premium) and hold for a target of ₹17.50.
As the option premium swings wildly due to time decay, we advise traders to follow the price movements diligently and adopt the suitable strategy strictly with trailing stop-losses.
Follow-up: Hold Wipro strangle positions for one more week, as advised earlier. The position is currently neutral.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading