F&O strategy: run out of Eicher Motors

The long-term outlook remains positive for Eicher Motors stock (₹3,355.10) and will remain bullish as long as it stays above ₹2,280. However, in the short term, the stock may face some headwinds after recording its all-time high of ₹3,513.70 (August 25). The stock finds immediate support at ₹3,160 and the next at ₹2,945. A close below the latter risks changing the medium-term outlook to negative for Eicher Motors. On the other hand, if the stock maintains the current trend, it has the potential to hit ₹3,850.

F&O pointers: Eicher Motors September futures at ₹3,355.40 commands little premium to the underlying close of ₹3,355.10. However, the counter saw a strong turnover of 94% of the playoffs from August to September. Open interest also saw a steady increase in shares from 1.4 lakh shares to 33.73 lakh shares. This signals the existence of long positions. Options trading indicates a move in the range of ₹3,000-3,500 for Eicher Motors.

Strategy: Even though the main trend is bullish, the stock seems to be experiencing a short-term decline. We therefore advise traders to consider shorting Eicher Motors for a target of ₹2,945. While the initial stop-loss can be placed at ₹3,440, it can be lowered to ₹3,336 if the futures contract falls below ₹3,250. The stop loss can still be moved to ₹3,240 if the price falls below ₹3,100.

We expect the stock to be volatile as it will announce its August sales figures on September 1 or 2.

This strategy is for traders who can understand the risks of shorting futures contracts and who can withstand wild swings. Traders should keep in mind that futures trading involves higher margin commitments and can result in heavy losses if the trend goes against our forecast.

Follow: Traders can book profits on IEX call options at ₹0.5. We had advised traders to sell the IEX 190 call option at a premium of ₹3.25.

Note: Recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.

Published on

August 27, 2022

Comments are closed.