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The short and long-term outlook remains negative for Crompton Greaves (₹127). Only a conclusive close above ₹166 can change the outlook to positive . The stock currently finds resistance at ₹134 and at ₹152. Key support isat ₹109. A close below it can trigger a fresh sell-off.
F&O pointers: The Crompton Greaves futures added fresh short positions on Friday;accumulating 1.77 lakh shares in open interest. Put options indicates support at ₹120. Call options suggests resistance at ₹130.
Strategy: Despite negative outlook, we are advising traders to consider a bull-call spread strategy, as we expect a technical pull back. This strategy can be initiated by selling 140-strike call and simultaneously buying 130-strike call. These options have closed with a premium of ₹2.20 and ₹5.50 respectively. This strategy will cost an initial outflow of ₹3.30/contract. So, the maximum loss can be ₹9,900 (market lot 3,000 units per contract) if Crompton Greaves closes at or below ₹130. A maximum profit of ₹20,100 is possible, should the Crompton Greaves stock close at or above ₹140.
Risk appetite traders can hold the position for at least three weeks .
Exit if the loss mounts to ₹6,500.
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