Shares of Sun Pharmaceutical Industries (₹845.7) are ruling at a crucial level. The stock finds an immediate resistance at ₹865 and the major one at ₹901. A close above the latter will trigger a fresh rally in the stock. It finds an immediate support at ₹825 and the next one at ₹799. A close below the latter will alter the long-term positive outlook on Sun Pharma. We expect the stock to sustain the bullish trend with short-term volatility.

F&O pointers: The counter saw unwinding of open positions in the last few days as the futures slipped from ₹890 to ₹846. From 2.21 crore shares on May 31, open interests dipped to 2.11 crore shares. Option trading indicates the stock may move between ₹800 and ₹900.

Strategy: We advise traders to buy 850-call on Sun Pharma. As the option closed with a premium of ₹20.65, this will cost the traders ₹14,455, which will be the maximum loss in this strategy. This will happen if Sun Pharma stays at or below ₹850 on expiry. We expect the stock to fall initially but bounce back later. If the stock slips sharply, traders can buy the 840-call instead.

We advise traders to exit the position with profit of ₹15,000 or if the loss mounts to ₹9,800. Alternatively, traders could consider going long on Sun Pharma futures (₹848.45), with an initial stop loss at ₹799, which can be shifted to ₹825 if the stock moves past ₹850 for a target of ₹900 with trailing stop-losses.

Follow-up: Though the strategy on BPCL moved on expected lines last Monday, subsequently the stock reversed the direction. Those who failed to book profits can hold the positions with a mentioned stop 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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