Market Strategy

Stock Strategy: Consider going short on SAIL

K.S. Badri Narayanan | Updated on July 21, 2012 Published on July 21, 2012



Educomp Solutions (Rs 169): Despite the recent recovery, outlook for Educomp Solutions is still negative. The stock registered its all-time low of Rs 128 in May and recovered from there. However, it is now ruling near resistance zone. Educomp Solutions finds immediate resistance at Rs 176 and the crucial one at Rs 192. Only a close above Rs 267 will arrest the downward bias for the stock. The stock finds immediate support at Rs 136 and is likely to head towards that.

F&O Pointers: The Educomp Solutions futures witnessed a rollover of just nine per cent. Options are not that active.

Strategy: Consider going short on Educomp August futures with a tight stop-loss at Rs 176 (spot price on a closing day basis) for a target of Rs 136.

Shift the stop-loss to Rs 155 once it dips below that level. Market lot of Educomp Solution is 2,000.

Alternatively, traders can consider writing 170 July call, which closed around Rs 3 on Friday. Maximum profit in this strategy is the premium collected (i.e. 3 * 2,000 market lot excluding brokerages and other charges), while loss could be unlimited if Educomp Solutions recovers sharply. Besides, writing an Option involves margin commitments. Hence this strategy is suitable only for traders who can afford to bear those risks. Loss will start pinching traders if Educomp moves above Rs 173.

SAIL: The outlook remains neutral for SAIL. It is ruling near its crucial support level. The stock finds immediate support at Rs 87 and resistance at Rs 98. A close below the support has the potential to drag SAIL towards its recent low level near Rs 73. SAIL finds immediate major resistance at Rs 129, which is far away from current level.

F&O pointers: The SAIL futures witnessed fresh accumulation of short positions on Friday. About 42 per cent of the position got rolled over to August series. Options are not that active.

Strategy: Consider shorting SAIL with a stop-loss at Rs 96. Stop-loss could be adjusted to Rs 92 once it dips below that level. Traders could aim for a target of Rs 73. Market lot for SAIL is 4,000.

Follow-up: Last week we advised a short strangle on IDFC using 130 put and 140 call. As expected, the stock stuck in that range, and the position is positive. Traders could consider holding it, till expiry.

(Note: Feedback or queries (on positions) may be sent to > f&, > by Sunday noon. Replies will be published on Monday.)

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Published on July 21, 2012
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