Stock Strategy: Negative bias on HDIL, CNX-IT

K.S. Badri Narayanan | Updated on March 28, 2011 Published on March 19, 2011


HDIL: After a minor recovery in the last one month, the stock turned weak on Friday. HDIL is likely to move in the range between Rs 168 to Rs 136 during the medium-term. However, the short-term outlook appears negative and is headed for Rs 136. A close below Rs 124 could drag it below Rs 100.

Only a close above Rs 186 would change the medium-term outlook to positive. In that event, the stock could reach Rs 285.

F&O pointers: The HDIL futures witnessed unwinding of long positions, indicating that traders are booking profits.

Option trading also indicates a negative bias as calls witnessed accumulation of open interest. On the other hand, puts saw unwinding of positions.

Strategy: Traders could consider going short on HDIL futures (market lot 1000) keeping the stop-loss at Rs 168 for an initial target of Rs 136.

If the stock opens on negative note, shift the stop-loss to Rs 155 (spot price on a closing day basis).

Trades with a penchant for risk can also consider selling HDIL 160 call that closed on Friday at Rs 2.80.

While the maximum profit in this strategy is the premium collected, the loss could be unlimited if HDIL stock moves up. This strategy requires higher margin commitments.

The strategy would deliver only if HDIL moves down or stays at current levels till expiry.

CNX-IT: The outlook turned negative for the CNX-IT index. As long as it stays below 7,015, the outlook would remain negative. It now finds crucial support at 6,503, which is very close to the current closing level. A break below this level could trigger a fall to 6,250, and then next at 5,970.

F&O pointers: The CNX-IT index futures added fresh short positions on Friday. Options are not active in the CNX-IT index.

Strategy: Traders can consider going short on CNX-IT if it dips below 6,503 and can stay away if it holds at current levels. Keep the stop-loss at 6,503if CNX-IT index gives an entry point.

Follow-up: Last week, we had advised three strategies on Tata Steel. Short on Tata Steel futures; buying 580 put; and writing 600 call. Tata Steel moved in a narrow range. We believe that a negative bias still persists and advice traders to hold their position. We had also advised traders to consider shorting Bank of India. It moved on expected lines. Traders can hold the position with revised stop-loss at Rs 453.

Feedback or queries (on positions) may be sent to f&o@thehindu.co.in by Sunday noon. Replies will be published on Monday.

Published on March 19, 2011

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