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A strong up-move on Friday turned the short-term outlook positive for Reliance Power (₹76.3). Another conclusive close above ₹76 will confirm the short-term turnaround. If the stock rules above ₹ 71, it can touch ₹86 and ₹107. Only a close above ₹138 will change the long-term outlook positive.
F&O pointers: Despite the sharp rally, Reliance Power did not see accumulation of open interest. This indicates that the rally was mainly on account of trading interest in cash market. Option trading indicates that it will not fall below ₹65. Call positions indicate ₹80 as the next resistance level. Strategy: Traders can consider two strategies depending on their risk profile.
Risk takers can consider going long on Reliance Power with a stop loss at ₹72. The stop-loss can be shifted to ₹76 if the stock opens on a positive note. Target can be ₹86 and ₹92.
Risk averse traders can consider buying ₹80 call that closed with a premium of ₹2.
Maximum loss in this strategy will be ₹8,000, as the market lot for Reliance Power is 4,000 units. Traders can exit the position if the loss mounts to ₹4,500.
If Reliance Power continues its rally as expected and closes above ₹82, the position will turn positive.
Follow-up: Traders can hold positions on Maruti as advised last week.
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