The short-term outlook remains positive for Infosys (₹2,073.6) as long as it trades above ₹1,906. The stock is likely to continue its up move above this level. A close below ₹1,906 could drag the stock down to ₹1,770. The stock finds immediate support at ₹1,950 and resistance at ₹2,105. After rallying sharply on Friday, we expect Infosys to move within a narrow range.
F&O pointers: Thanks to a strong show on Friday, the Infosys January futures added 7.7 lakh shares on the long side. Option trading indicates a mixed view.
Strategy: Traders can consider a short strangle on Infosys. This can be initiated by selling ₹2,200 call and ₹1,900 put. They closed with a premium of ₹16.10 and ₹7.55 respectively. This strategy will result in an inflow of about ₹5,900, which will be the maximum profit one can earn in this strategy. For that to happen, Infosys has to settle between ₹2,200 and ₹1,900.
On the other hand, the loss could be unlimited if Infosys moves wildly in any one direction, either up or down. A close above ₹2,223 or below ₹1,877 will start pinching the position.
Follow-up: We advised shorting Reliance Communications. Traders can consider holding their position with trailing stop loss.
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