The stock of Hindalco Industries (₹649.15) is ruling at a crucial level. Immediate resistances are at ₹677 and ₹721. A conclusive close above the latter will trigger a fresh rally. Nearest support levels are at ₹621 and ₹575. A close below the latter will change the short-term outlook negative.
F&O pointers: On Friday, Hindalco June futures and July futures closed at ₹648.15 and ₹651.95 respectively against the spot price of ₹649.15. The higher premium for July futures hints that majority of the rollover is on the long side. Option trading indicates that the stock could move in the ₹600-700 range.
Strategy: Consider a calendar bull-call spread on Hindalco. This can be initiated by selling June 650-call and simultaneously buying July 650-call. This strategy will be most profitable if the underlying sees some moderation until June expiry and then rise.
On Friday, June 650-call and July 650-call closed with a premium of ₹5.85 and ₹21.95 respectively. So, this strategy will cost traders ₹22,120 (market lot: 1,400 shares), which would be the maximum loss in this trade. But profit potentials are high if Hindalco moves up sharply after the expiry of the current series.
Traders can aim for a profit target of ₹10,000. Traders with higher risk appetite can target ₹15,000. On the other hand, exit if the loss mounts to ₹7,500. Hold the position for at least two weeks.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.