We spoke to an analyst on how one should trade stocks that were in focus in the previous trading sessions based on derivative and technical data.
Analyst: Sheersham Gupta, Director and Senior Technical Analyst at Rupeezy
SBI Life: All-Time High Resistance Breakout
SBI Life had been trading in the range of 1025-1380 for the past two years. On 17th November, the stock gave a positive breakout. The breakout candle was strong with good volume. Since then, the stock has been consolidating for five trading sessions with decreasing volume depicting a lack of interest from the sellers.
The stock reversed to test the resistance level of 1395 and has been holding above the resistance. The testing of the resistance confirms the breakout of the stock.
The daily RSI is also at 60 indicating that it is still not in the overbought zone and has a good upside potential from here.
On the derivative front, more puts have been written in comparison to calls in the November expiry series showing the conviction of the bulls that the stock is more likely to stay above 1400.
Technical Analysis and Option Chain suggest a bullish view of the stock. Thus, SBI Life can be accumulated with a stop loss of 1350. In the short term, the stock can see levels of 1500, and in the medium term 1540 and above.
BPCL: Cup and Handle Breakout
The level of 400 was long-time resistance for BPCL and the stock has been trading below it for the past two years. BPCL had a very good run in the past one month to reach the level of 400.
It gave a breakout from this level on Wednesday with a strong bullish candle followed by another strong candle the next day. The breakout was with good volumes forming a cup and handle pattern.
Although the stock consolidated on Friday, it decisively stayed above 400 confirming the breakout.
The daily RSI is near 75 but the weekly RSI is 68.5 indicating it is up for another bull run from here. However, a consolidation for a few days can not be ruled out.
On the derivative front, most puts have been written at the strike of 390 followed by 400 for the current month. This shows the conviction of the bulls that it will stay above 400.
All the aforementioned points indicate that BPCL is a good bet for accumulation and can see levels of 470 in the short term and 500 in the medium term. The stop loss can be placed at 380.5.
AgenciesExide Industries – Inverted Head and Shoulder breakout
Exide Industries had a resistance at 280 from where the stock fell after giving a false breakout in September. The stock fell about 13% finding support at 240. From there, Exide has given a breakout above 280 with good volume forming an inverted head and shoulder.
Exide has been consolidating above 280 for the past five trading sessions with decreasing volume. Even on Friday when the stock fell about 0.74% the volume was less depicting the disinterest of the sellers.
On the derivative front, the largest number of put contracts are written at 280 for the current month. This means that the traders believe it will not go below 280. The option chain also shows that the call options are bought for the next month.
Long positions can be created in Exide Industries with a short-term view of one month. The target would be 300 and stop loss at 271.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)