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The outlook for the stock of Cipla (₹488.9) is negative. However, after quite a strong fall in recent times, we expect the worst may be over the Cipla, which finds an immediate and a major support at ₹468. Cipla could bounce back valiantly from this support. The stock finds an immediate resistance at ₹540 and a breach above this level could lift it to ₹635. The chance of Cipla bouncing back sharply appears bright.
F&O pointers: Cipla added short positions on Friday, signalling persistence of bearishness among the traders, despite a sharp fall. Option trading indicates that it could face strong support around ₹480.
Strategy: Traders with a risk appetite can consider going long on Cipla futures. With a stop-loss at ₹472 (for futures), traders could aim for an initial target of ₹540. Stop-loss can be shifted to ₹492 on a strong rally. Traders with a high risk appetite can even aim for the higher target of ₹635 with trailing the stop-loss. Also, can consider buying ₹500-call option closed at ₹15.55 on Friday, entailing an outflow of ₹15,550 (market lot 1,000). While the maximum loss is the premium paid, profits could be huge if Cipla makes a sharp up-move. Traders could exit if the premium dips to ₹6.25 or rises to ₹25.
F&O pointers: Hold HUL options.
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