The short-term outlook has turned positive for Sun Pharmaceutical Industries (₹623.50), which has been making consistent recovery after it touched a low of ₹435 in May. The stock finds an immediate support at ₹580 and a crucial one at ₹499. A close below the latter will re-confirm the bearish trend on Sun Pharma. On the other hand, Sun Pharma faces an immediate resistance at ₹682 and a close above ₹853 will change the long-term outlook to positive. We expect the stock to maintain the positive trend and hit the immediate resistance.

F&O pointers: Sun Pharma futures witnessed unwinding of positions (14.46 lakh shares or 3.43 per cent) on Friday, despite the underlying gaining sharply. Option trading indicates that ₹640-strike call and ₹600-strike put options have strong open positions.

Strategy: Expecting a bounce-back, we suggest a calendar bull-call spread strategy for traders. This can be initiated by selling ₹620-call of August strike and simultaneously buying the same in September series.

While the August call closed at ₹16.60, the same strike in September has closed at ₹26.60. With market lot being 1,100 shares, one has to shell out ₹11,000 to initiate the strategy. The maximum loss would be the premium paid, for which Sun Pharma has to close at or below ₹620 at the time of September contract expiry. However, profit potentials are unlimited if Sun Pharma rallies in September. A close above ₹630 will start yielding profits in this strategy. Profits will multiply if Sun Pharma remains subdued in August and makes a strong rally in September. Hold the position till mid-week of September.

Follow-up: Hold Wipro positions as recommended.

 

Related Topics
comment COMMENT NOW