Weak trend persists in HDFC, Videocon

HDFC: The immediate outlook is negative for HDFC. The stock has registered its all-time high in September 2010 but has since been witnessing a sideways trend with downward bias.

It now finds an immediate resistance at Rs 725 while it finds support at Rs 586. Rs 536 offers a crucial support before that.

A close below Rs 450 would change the overall outlook to negative.

On the other hand, a conclusive close above Rs 785 would take the stock to a new high. In that event, it could go up to Rs 950-975 level.

F&O pointers: HDFC witnessed accumulation of short positions on Friday. The farther month (June) futures closed at a mild discount to the spot close of Rs 645.6.

Option trading presents a cautions view with negative bias.

While 660 put witnessed unwinding of open position, 640 put saw accumulation.

Calls also witnessed accumulation of open interest suggesting limited upside for HDFC.

Strategy: Traders can consider going short on HDFC (market lot: 500 shares) with a strict stop-loss at Rs 725 for an initial target of Rs 586.

If the stock moves on expected lines, adjust the stop-loss suitably to protect profits.

Alternatively, traders can consider writing 660 call that closed on Friday with a premium of Rs 8.

While the maximum profit in this strategy is the premium collected (i.e. Rs 4,000; 500*Rs 8), the loss could be unlimited if HDFC moves up sharply. Besides, writing options involves margin commitment. So this strategy is only for traders who can stomach high risks.

Videocon Industries: The outlook remains negative for Videocon Industries.

The stock has been on a downtrend since October 2010.

The immediate support appears at Rs 187, while the immediate resistance is at Rs 220.

The next two support levels are at Rs 163 and Rs 122. Videocon finds major resistance at Rs 286.

F&O pointers: Derivative trading provides little cues for Videocon Industries.

While futures closed with a marginal premium over the spot price of Rs 192.90.

It saw negligible accumulation of about 5,000 shares in open interest on Friday.

None of the options witnessed any trading activity.

Strategy: Traders can consider shorting Videocon Industries with a tight stop-loss at Rs 196 for an initial target of Rs 187.

If the stock opens on a weak note, shift the stop-loss lower to Rs 193. On the contrary, if it opens on a positive note, traders should ignore this recommendation.

Follow-up: Last week we had advised traders to go short on SBI. We had also suggested traders to consider writing SBI.

Both the positions are marginally negative. As suggested, traders can consider holding both the positions till expiry.

We had also advised traders to construct a short strangle on Tata Motors using 1250 call and 1150 put. The position is slightly in the money. We advise traders to hold the position for one more week.

Feedback or queries (on positions) may be sent to >f&o@thehindu.co.in, >blfuturesoptions@gmail.com by Sunday noon. Replies will be published on Monday.

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