Though the long-term outlook remains positive for the stock of HDFC Bank (₹1,463.25), the short-term trend has turned negative. The stock finds immediate support at ₹1,415 and the crucial one at ₹1,355. A close below ₹1,304 will the alter the long-term positive outlook. On the other hand, a conclusive close above ₹1,605 will reconfirm the bullish trend and that can lift the stock to ₹1,725.
F&O Pointers: The HDFC Bank futures closed at ₹1,466.45 as against the spot price of ₹1,463.25. Amid steady fall in underlying price from ₹1,575 to current levels, HDFC Bank futures saw accumulation of open interest positions. In fact, it was one of the counters that saw a rollover of over 95 per cent in open positions from January to February, signalling positive bias. Trading in option indicates a possible range of ₹1,400-₹1,600.
Event: The Union Budget will be announced on February 1 (Tuesday) and the market will be volatile. As the thrust and impact will always be on banking, these stocks will swing more on Budget Day viz-a-viz other stocks.
Strategy: We advise traders to consider long strangle on HDFC Bank options by simultaneously buying ₹1520-strike call and ₹1,400-strike put. These options closed at ₹23.30 and ₹18.55. As the market lot is 550 shares, the strategy will cost traders ₹23,017.50, which will be the maximum loss one can suffer. Maximum loss will happen if HDFC Bank is stuck between ₹1,520 and ₹1,400.
On the other hand, profit potentials are high if HDFC Bank swings sharply in either direction. A close above ₹1,561.85 or below ₹1,358.15 (about 7 per cent swing on either side), will make the strategy profitable. We advise traders to hold the position for a maximum of four days with tight trailing stop loss. Exit the position if loss mounts to ₹15,000.
Follow-up: Stop loss would have triggered in Tata Communications.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.