In Monday’s session, the stock broke above its resistance level with large volumes, which could suggest potential bullish momentum for the stock.
“If the price manages to close above the Rs 14,000 level, it could potentially reach short-term targets of Rs 16,000 and Rs 17,000,” said Mandar Bhojane, Derivative Analyst at Choice Broking.
Technically, on the daily chart, the stock is placed well above all its significant short-, medium, and long-term exponential moving averages (EMA). In the recent past, the stock’s 50-DEMA has been acting as its strong and meaningful support.
Additionally, the Relative Strength Index (RSI) is currently at 68.5 and is trending upward, indicating increasing buying momentum.
“On the downside, immediate support is located at Rs 13,000, which can be considered an opportunity to buy on dips,” Bhojane added.Option data further suggests that the highest concentration of Put (PE) open interest is at the Rs 13,000 strike price, indicating that this level could serve as immediate support. Conversely, the highest Call (CE) open interest is at the Rs 15,000 strike price, which the stock has already surpassed.Bhojane believes that the breakout above the Rs 15,000 level could trigger short covering, potentially driving the stock higher, and hence suggests deploying a Broken Wing options strategy to gain from the bullish stance.
Broken Wing
The Broken Wing Options Strategy, specifically the Broken Wing Butterfly (BWB), is a variation of the classic butterfly spread. It is designed to capitalize on directional market moves while reducing risk and cost. The term “broken wing” refers to the intentional imbalance of one of the butterfly’s wings, creating a skewed risk/reward profile.
This strategy lowers the initial cost or generates a credit while limiting both risk and reward on one side of the trade, typically used to capitalize on small directional moves with defined risk.
(Prices as of September 16)
Below is the payoff graph of the strategy:
ETMarkets.com(Source: Choice Broking)
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)
