Technical Analysis

Future Perfect - TVS Motor: Speed breaker ahead

KS BADRI NARAYANAN | Updated on January 09, 2018 Published on August 20, 2017

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The long-term outlook for TVS Motor Company (₹584.6) appears bright. The stock finds immediate support at ₹555 and a crucial one at ₹530. On the other hand, if TVS Motor sustains the current rally, it can touch ₹652. The stock can climb to the fresh peak with intermittent corrections. However, we expect the stock to face some selling pressure in the immediate term. A close below ₹530 will change the medium-term outlook to negative for TVS Motor.

F&O Pointers: The August futures of TVS Motor shed open positions on Friday despite a marginal rise in the share price, signalling profit taking. Futures trade at ₹578.90, at a discount to the spot price of ₹584.60, signal the existence of short positions.

Strategy: Traders can buy ₹560-strike put on TVS Motor. It closed with a premium of ₹6.80 on Friday.

As the market lot is 2,000 shares per contract, this strategy will ensure an initial outgo of ₹13,600, which would be the maximum loss one can suffer in this strategy. For that to happen, TVS Motor has to close at or above ₹560 at the time of expiry. While the break-even point is ₹553.20, a close below that level will start yielding positive return.

Traders can exit the position if the premium rises to ₹10 or dips to ₹2.65.

Follow-up: As mentioned, investors with a high-risk-appetite can hold on to Suzlon positions.

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Published on August 20, 2017
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