Technical Analysis

Take a call on Idea Cellular

KS Badri Narayanan | Updated on January 20, 2018 Published on June 05, 2016

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Despite the steep fall on Friday, the short and medium-term outlook remains positive for Idea Cellular (₹106). A close above ₹110 will confirm the positive trend. Idea Cellular faces resistance at ₹125 and ₹137.

The stock finds crucial support at ₹98, a close below which the outlook can turn negative. Idea Cellular may then move lower to ₹82.

F&O Pointers: The counter witnessed a huge accumulation of 1.97 crore shares in open interest amid a sharp price fall in the underlying stock.

This indicates accumulation of short positions. However, Idea Cellular (June) futures price (₹105.2) has narrowed down its discount with respect to the spot price quite considerably. Option trading indicates a range of ₹100-115 for the stock.

Strategy: Traders can consider buying 110-call on Idea Cellular. It closed with a premium of ₹2.75 on Friday. With the market lot being 3,000 shares a contract, one has to fork out ₹8,250 to buy the option. This can be the maximum loss one can suffer, if Idea Cellular fails to cross ₹112.75.

Profit potential is unlimited in this strategy, if Idea Cellular manages to climb swiftly in this series itself.

Traders can consider exiting this strategy if the option premium touches ₹7.75. Traders with high risk appetite can consider going long on Idea Cellular futures with a strict stop-loss at ₹98 for an initial target of ₹118.

Published on June 05, 2016
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