Market Strategy

Consider going long on NMDC

K.S. Badri Narayanan | Updated on March 12, 2018 Published on November 30, 2013

NMDC (Rs 132): The immediate outlook for NMDC turned positive after the stock closed above Rs 124. If the current rally sustains, NMDC can reach Rs 147. The medium-term outlook will turn positive only if the stock closes above Rs 162. A close below Rs 125 will drag the stock towards Rs 109. However, the overall long-term outlook still remains negative for the counter. Only a close above Rs 250 will change the long-term outlook positive. Till such time, the stock will witness intermittent corrections,some of which could be quite sharp.

F&O pointers: The NMDC futures witnessed a rollover of 85 per cent to December series as against the three-month average of 75 per cent. Despite a strong gain on Friday, the futures shed about 3.3 lakh shares in open interest. This indicates profit-booking by traders.

Cost of carry remains positive. Option trading indicates Rs 130 as a crucial level.

Strategy: Traders can consider going long on NMDC futures. Setting a stop-loss at Rs 124, traders can retire the position at Rs 147. Long-term term traders can even consider rolling over the positions for a higher target of Rs 162.

If the stock opens on a positive note, stop-loss can be shifted to Rs 129 and then to Rs 134. Alternatively, traders can also consider buying Rs 135 call, which closed at a premium of Rs 3.4.

As the market lot is 2,000, this strategy will incur an initial outgo of about Rs 7,000. Traders can exit the position if the option premium either hits Rs 12 or Rs 1.4.

Follow-up: Last week, we advised a short straddle on IDFC. The position would have closed with maximum profits, as the stock ended the November series on expected lines.



( Note: Feedback or queries (on positions) may be sent to blfuturesoptions@gmail.com by Sunday noon. Replies will be published on Monday.)

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