The stock of ITC (₹438.45), in the short term, may find some resistance, although the long-term outlook remains positive. The immediate support is at ₹420 and the major one at ₹375. A close below the latter will cancel the bullish outlook, potentially leading to a fall to ₹344. However, if the stock manages to sustain the current rally, the stock could make new highs above ₹500.
However, we expect ITC to move in a narrow range with downward bias in the short term.
F&O pointers: The ITC June futures on Friday closed at ₹440.85, at a premium against the spot price of ₹438.45. This signals the existence of long positions, as traders still remain bullish on the stock and are willing to carry their buys. Option trading indicates that the stock may move between ₹420 and ₹475, where respective put and call options witnessed concentration of open interests.
Strategy: We advise traders to consider plain-vanilla option strategy on ITC. Traders can buy the 435-strike put option, which closed at ₹4.25. As the market lot is 1,600 shares, this strategy will cost ₹6,800, which will be the maximum loss. This will happen if ITC fails to fall below ₹435 before expiry.
However, profit potential is huge should the stock slide sharply within the next few days. The break-even point is ₹430.75.
We advise traders to hold the position and can aim for an initial target ₹10 (premium value) and a final target of ₹15. Keep the stop-loss according to the individual risk profile. Hold the position for at least two weeks.
Follow-up:TVS Motor moved on expected lines, and we advise traders to book profits
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading