Technical Analysis

Buy put on Ashok Leyland

KS Badri Narayanan | Updated on March 05, 2018 Published on March 04, 2018

If the current trend sustains, Ashok Leyland can climb to a new peak around ₹180.

The outlook for Ashok Leyland(₹140.7) remains positive in the medium term and short term. Even the long-term outlook will remain bullish, as long as the stock stays above ₹98. However, after a relentless run, we expect some moderation in the stock of Ashok Leyland. The stock finds an immediate support at ₹128 and the next one at ₹112. If the current trend sustains, Ashok Leyland can climb to a new peak around ₹180.

F&O pointers: Despite hitting its all-time high on Friday, Ashok Leyland March futures witnessed massive unwinding of open positions; it shed 35.98 lakh shares (or 6.2 per cent) in open positions, signalling profit booking by traders. Option trading indicates that Ashok Leyland can move between ₹120 and ₹150.

 

 

 

 

 

  

 

 

Strategy: Expecting a cool-off, we advice traders to buy a ₹135-put, which closed at ₹2. As the market lot is 7,000 shares, the strategy will cost traders ₹14,000.

The initial cost paid would be the maximum loss one can suffer in this strategy, if the stock stays at or above ₹135 at the time of expiry.

On the other hand, profit potentials are very high. Any close below ₹132.5 will increase the profitability of the position along with time value. We advice traders to hold on to the position for at lest two weeks. Risk-averse traders could stay away.

 

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Published on March 04, 2018
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