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The ongoing fall in the stock market provides a golden opportunity for long-term investors in the futures of Tata Power Company (₹56.5), whose share price currently trades at an eight-year low. The near-term technical outlook is negative.
If the current trend sustains, the stock could even touch ₹39.50. Only a conclusive close above ₹73.6 will change the outlook to positive.
F&O pointers: The Tata Power Company September futures witnessed unwinding of open positions due to the sharp fall in the share price. This is a bearish signal. Option trading data indicates that the stock will encounter strong resistance at ₹62.50.
Strategy: Consider buying Tata Power futures as the contract heads lower. This strategy is only for investors with long-term objective (at least two years) and willing to withstand volatility and is not for traders. Stop loss can be kept at ₹39.
Since it also involves large capital outlay in the form of margin money and any loss has to be made good by regularly paying the mark-to-market difference, only those with deep pockets should consider this strategy. Besides, from November, the lot size will be doubled to 8,000 shares. Initial target is ₹90 and the next is ₹114.
Follow-up: We had advised traders to consider short strangle on Cairn India. Traders can hold the position as advised.
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