Technical Analysis

Go long on Lupin

K.S. Badri Narayanan | Updated on May 26, 2019 Published on May 26, 2019


The long-term outlook for Lupin ₹765) remains negative. However, in the short term, the pharma stock is expected to remain resilient. The stock finds immediate support at ₹725, and a close below this will change even the short-term outlook to negative. Lupin finds immediate resistance at ₹812 and a major one at ₹865. A conclusive close above the latter will alter the medium-term outlook to positive, and has the potential to lift Lupin to ₹965 levels.

F&O pointers: Despite gaining on Friday, Lupin May futures shed open interest positions. The counter has been witnessing steady decline in open interests, signalling cautiousness of investors/traders. Option trading indicates a wide range of ₹700-850.

Strategy: Traders with a high-risk appetite can consider going long on Lupin futures. While the stop-loss can be placed at ₹723 initially, it can be shifted to ₹762 if the stock moves past that level. Traders can aim for an initial target of ₹812. Conservative traders can consider a calendar bull spread by selling Lupin ₹780-call of May and, simultaneously, buying the same strike of June call. They closed with premiums of ₹3.45 and ₹25.10 respectively. This will cost investors ₹15,155, as the market lot is 700. While the maximum loss is the premium paid, the profit can be unlimited if Lupin falls initially (during this month) and rises in the next series. Traders can exit if the loss hits ₹7,900 or the profit zooms to ₹10,500. Hold this position at least for three weeks.



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