Technical Analysis

Stocks strategy: Consider going short on VIP Industries

K.S. Badri Narayanan | Updated on November 05, 2011 Published on November 05, 2011


Tata Global Beverages (Rs 91): The long-term outlook remains negative for the stock Tata Global Beverages. Only a close above Rs 106.5 will negate the current outlook. The stock finds immediate resistance at Rs 96 and support at Rs 84. It finds major support at Rs 75, a conclusive close below that would trigger a fresh fall. If the stock manages to close above the key resistance, then it can create new all-time high for the stock, breaking the current peak of Rs 138.

F&O pointers: The Tata Global Beverages futures witnessed unwinding of long positions on Friday despite the stock gaining marginally. It shed over one lakh shares in open interest. This indicates that traders are not willing to carry over their position and preferred to book profits. Options are not active on Tata Global Beverages.

Strategy: Traders could consider going short on Tata Global Beverages. While the stop-loss can be placed at Rs 96, profits can be booked at Rs 84. This strategy is for traders who have patience as the stock is low beta in nature. It may not swing wildly in relation to index fluctuations. Market lot is 4,000 shares a contract.

VIP Industries (Rs 160): The long-term outlook turned negative for VIP Industries as it closed below its major support of Rs 167. The stock now finds immediate resistance at Rs 172 and support at Rs 143. For VIP Industries, the major support is placed at Rs 132. A close below Rs 132 would trigger a fresh sell-off, which can push the stock sharply downwards to Rs 103. Likewise, a conclusive close above Rs 189 would change the outlook positive for the stock. In that event, VIP Industries could chart a new all-time high. F&O pointers: VIP Industries added fresh short positions on Friday; it accumulated over one lakh shares in open interests. Options are not active on VIP industries.

Strategy: Traders could consider going short on VIP Industries, keeping the stop-loss at Rs 172 for an initial target of Rs 143. Trail the stop-loss so as to protect profit potentials. In case VIP Industries opens on a negative note on Tuesday, investors can keep the stop-loss at day's opening or high for the recommended target. Market lot is 1,250 shares a contract.

Note: Both the strategies are for traders who have high penchant for risk, as the market lot is high.

Follow-up: We had recommended a short strangle on TCS. The position is in-the-money. As expected, the stock faced resistance and moved downwards. Investors could hold on the strategy till expiry for maximum profits. We had also recommended a long on Aurobindo Pharma. Though the stock opened on positive note, it could not sustain the initial gains. We recommend an exit, even though the stop-loss mentioned last week still holds.

Published on November 05, 2011
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