The long-term outlook for the stock of Divi’s Laboratories (₹5,846.75) will remain positive as long as the price holds above ₹4,650. In the short-term it could move in a narrow range with a positive bias.

Immediate support levels for the stock are at ₹5,750 and ₹5,423. On the other hand, if the stock manages to close above ₹5,950, it has the potential to reach a new high.

F&O pointers: The counter witnessed a rollover of 31 per cent to January series, which is quite healthy. Divi’s Lab Jan futures at ₹5,890.45 and Dec futures at ₹5,855.35 against the spot price of ₹5,846.75 signals existence and rollover of long positions. Option trading indicates that the stock could move in the ₹5,400-6,400 range.

Strategy: Consider a bull-call spread using January options. Initiate by simultaneously selling 6000-strike (₹145.60) and buying the 5,900-strike (₹188.75) call options. The net cost for this strategy would be ₹43.15 or ₹4,315 (market lot 100 shares).

The maximum loss (if the stock closes below ₹5,900 on expiry) would be the premium paid (₹4,315). However, a profit of ₹5,685 is possible should the stock rise to ₹6,000 before expiry. Hold the position for at least two weeks.

Traders who can afford to take higher risk, can just buy Divi’s Lab 6,000-call (₹145.60) rather than executing a call spread. Target and stop-loss can be ₹225 and ₹60 respectively.

Follow-up: Dixon Technologies provided profit opportunities last week as expected.

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

Published on December 21, 2024