Coal India’s stock (₹398.8) hit a multi-year high of ₹401.50 last week. A close above the resistance at ₹393 means that the stock has positioned itself for further rally from the current level. Since there is a strong momentum, Coal India can be considered for short-term trading in derivatives. Choose between futures and options (F&O) based on your risk appetite.
Futures (₹400.5): The February futures of Coal India broke out of a barrier at ₹395 last week. The chart indicates that the contract is likely to witness more gains in the near term. But there could be a minor correction from the current level, possibly to ₹395.
So, traders can buy Coal India futures (February series) when the price moderates to the resistance-turned-support of ₹395. Place stop-loss at ₹378 at first. When the contract touches ₹410, alter the stop-loss to ₹398. When the price hits ₹415, tighten the stop-loss further to ₹408. Book profits at ₹420.
Options: We advise buying the 400-strike February expiry call option. It closed at ₹20.1 last week. Since there is a possibility of a price correction, wait for now and buy the call when the stock price dips to ₹393. When this occurs, the option price is likely to drop to the ₹16-18 price band.
Liquidate the call option at the prevailing price when Coal India stock price touches ₹415. But if there is a decline, exit the option at the prevailing price when the stock falls to ₹375.
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.