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
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.