Technical Analysis

Future Perfect: Go long on BHEL July futures

KS BADRI NARAYANAN | Updated on January 24, 2018 Published on June 21, 2015


Though the long-term outlook remains negative for the stock of BHEL (₹241), in the short term, it could witness a rally. If the stock manages to hold above ₹230, it has the potential to move up to ₹261 and then to ₹286. For that to happen, BHEL has to close above ₹245. A further close above ₹286 will trigger a fresh rally in the stock. However, a close below ₹230 could drag the stock towards ₹194.

F&O pointers: The counter witnessed a roll-over of 11.5 per cent to the next month series. The July month contract on BHEL, albeit marginal, closed in discount with respect to the spot close, indicating existence of short positions. Option trading indicates a range between ₹240 and ₹260 for the stock.

Strategy: Traders could consider going long on BHEL July futures with a stop loss at ₹230. While traders could consider ₹261 as an initial target, risk-averse traders could even aim at ₹286. As the stock is one of the volatile counters, traders with a high risk appetite only should consider rolling over their positions for higher returns.

Alternatively, traders can buy ₹250-call that ended with a premium of ₹6.45. Here the maximum loss could be the premium paid, which works to ₹6,450. Traders can exit the position if the option premium hits ₹3 (booking a loss) or ₹14 (cashing in on gains).

Follow-up: We advise traders to continue the position, as the stock is moving on expected lines.

Published on June 21, 2015
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