While the short-term outlook remains negative for the stock of Tata Consultancy Services (TCS) (₹3,008.7), the medium-term outlook will remain positive as long as the stock stays above ₹2,840. TCS finds short term support at ₹2,916. On the other hand, TCS finds an immediate resistance at ₹3,097 and only a close above ₹3,503 will change even the short-term outlook positive.

F&O pointers: TCS September futures witnessed unwinding of long positions in recent times along with fall in share price. The contract, at ₹3,018.80, commands a premium of about ₹10 over the spot price, signalling existence of long positions. Option chain indicates TCS finds support in the ₹3,000-2,900 range and resistance at the ₹3,200-3,300 band.

Strategy: Traders could consider a calendar bull-call spread on TCS. The strategy can be initiated by selling the current month 3000-strike call and simultaneously buying 3000-strike call of October. These options closed with a premium of ₹96.80 and ₹160.20, which means an outlay of ₹63.40/contract to investors. That would be the maximum loss one can suffer in this strategy. As the market lot is 150 shares per lot, this works out to ₹9,510. Maximum loss will happen if TCS fails to cross ₹3,000 by the end of October expiry.

We advise traders to hold the position for at least three weeks. While the current month 3000-call short position can be closed on the last day of the series — September 29, traders can continue to hold the October long call. A close above ₹3,063.40 will start turning the position profit.

Follow-up: Tata Motors long 460 call option moved on expected lines and was briefly in profit, but failed to hit our target. Those who have not exited the position in profit can book loss.

Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.

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