The stock of Tata Motors (₹148) rules at a crucial level. Though the long-term outlook remains weak, in the short term, the stock could see a bounce back. While it finds strong support at ₹136, an immediate resistance appears at ₹168. However, only a close above ₹232 will alter the current negative trend for the stock. Till such time, the counter will move in a rough terrain only.
F&O pointers: The counter, which had witnessed unwinding of long positions and heavy short build-up, saw reversal of trend in the second-half of Friday and added fresh longs. Trading in options indicate that the stock will move in the ₹140-160 range.
Strategy: Traders can consider buying ₹160-call on Tata Motors. The option closed with a premium of ₹3.15. As the market lot is 3,000 stocks per lot, traders have to incur an initial outgo of ₹9,450, which will be the maximum loss one can suffer in this strategy. Maximum loss will happen if Tata Motors close at or below ₹160.
On the other hand, profit is unlimited if the stock zooms strongly in this series itself. A close above ₹163.15 will start yielding gains for traders. We advice traders to hold the position for two weeks initially. Traders can consider exiting the position with a minimum loss of ₹3,800 or with a profit of ₹7,500.
Aggressive traders, who can withstand wild swings and deep pockets, could even consider buying ₹155-call that closed at ₹4.70. Exit can be considered either at a loss of ₹7,500 or at a profit of ₹14,000.
Follow up: Those who did not book profit can exit from Maruti Suzuki position.
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