Technical Analysis

Take a call on Tata Power

KS BADRI NARAYANAN | Updated on January 16, 2018 Published on October 16, 2016


The medium-term outlook has turned positive for Tata Power Company (₹78.4), which marked its 52-week high of ₹82 last week. The stock finds immediate support at ₹74.75. Only a close below ₹62.2 can change the outlook to negative. A conclusive close above ₹84 will trigger a fresh rally in the stock, which can take it higher to ₹104.

F&O pointers: The stock was volatile in the truncated trading week. Unwinding of open positions signals a cautious stance by traders. Option trading indicates a range of ₹75-80 for the stock.

Strategy: Traders can consider buying a plain vanilla 80-strike price call option of Tata Power. It currently trades with a premium of ₹1.35. As the market lot is 9,000 shares per contract, investors have to fork out about ₹12,150, which will also be the maximum loss one can suffer. For that to happen, Tata Power has to close at or below ₹80. However, profits can be sizeable, if the stock manages to break the range. The break-even point is ₹81.35.

We advice traders to exit if the loss mounts to ₹7,500 or profit reaches ₹15,000.

Traders with high risk appetite can consider going long on Tata Power futures and roll over the position for at least three months. Stop loss can be placed at ₹65, for a target of ₹105. This strategy is for traders who can withstand huge swings that will require huge margin commitments.

Follow-up: Hold Infosys calendar spread strategy and allow the current month option to expire.

Published on October 16, 2016
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