Technical Analysis

Bet on bullish momentum

KS BADRI NARAYANAN | Updated on January 17, 2018 Published on August 21, 2016

21coalindia_col



The outlook for Nifty 50 futures remains positive. The index finds immediate support at 8,546 and the next crucial one at 8,287. Only a close below the latter will alter the short-term outlook. To alter the medium-term outlook to negative, the index has to close below 7,722.

Nifty 50 Futures (₹8677.2) index finds resistance at 8,728 and a close above this level will trigger a fresh rally in the index. Nifty 50 can then move past its previous peak of 9,008 it registered in March last year. Sustained rally can take Nifty 50 to 9,450 initially and then to 9,820.

F&O pointers: Nifty 50 futures witnessed a rollover of about 19 per cent to September series. Nifty 50 September futures closed on Friday at 8,727.1 against August futures price of 8,677.2 and the underlying index at 8,666.9. This signals that most rollovers are on the long side. Option trading indicates that Nifty could move in 8,500-8,800 range in the short term.

Strategy: Traders can consider a calendar spread on Nifty 50 using 8,600-strike call options. This can be constructed by selling 8,600-August call and simultaneously buying the 8,600-September call. They closed with a premium of ₹105.5 and ₹228.5 respectively. This strategy will cost traders ₹123/contract or ₹9,225 (as market lot is 75 per contract).

The maximum loss one suffers in this strategy is the premium paid (₹9,225). For that to happen, the index has to close at or below 8,600 level at the time of expiry.

However, the profit potential is unlimited in this strategy, particularly if Nifty 50 slips in the next four days and rises sharply after that. If that happens, the premium of August option will turn worthless, making the entire value (₹105.5) profitable. Hold the September option till the expiry. Profits can be booked in September option, if the benchmark index rises above 8,900.

Coal India (₹334.2): The long-term outlook for Coal India will turn positive only if the stock manages to close above ₹372. In the short term, we expect the stock to move in the range of ₹285-350. A close below ₹285 will turn the long-term outlook to negative for Coal India.

F&O pointers: Coal India August futures added over 10 lakh shares despite only a few days left for expiry. This signals build up of short positions. The counter witnessed a rollover of just 9 per cent to September series.

Strategy: With expiry round the corner, traders can consider buying 335 August call. It closed with a premium of ₹4.30. As the market lot is 1,700 shares per contract, the total loss could be ₹7,300.

We expect the stock to bounce back ahead of expiry. Traders can consider exiting the position, if premium declines to ₹1.5 or if it surges to ₹8.5.

Published on August 21, 2016

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
null
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.