Derivatives analyst Nandish Shah recommends Bull Spread on Bharat Forge

The analyst from HDFC Securities recommends buying Bharat Forge 790 Call and simultaneously selling 810 Call of the September series.

Bull Spread Strategy on Bharat Forge

Buy Bharat Forge (29-Sept Expiry) 790 CALL at Rs 15.65 & simultaneously sell 810 

CALL at Rs 9

Lot Size 1000

Cost of the strategy Rs 6.65 (Rs 6,650 per strategy)

Maximum profit Rs 13,350, if Bharat forge closes at or above Rs 810 on 29-Sept expiry.

Breakeven Point Rs 796.65

Approx margin required Rs 34,000

Rationale:

• We have seen long build up in the Bharat Forge futures, where we have seen 16% addition (Prov) in Open Interest with price rising by 3%.
   
• Stock price is forming higher top higher bottom formation on the daily chart. 
   
• Primary trend of the stock is positive as it is trading above its 50, 100 and 200 day EMA.
   
• Momentum Oscillators like RSI (11) and MFI (10) is in rising mode and placed above 60 on the daily chart, Indicating strength in the current uptrend.

Disclaimer: Nandish Shah is Technical Research Analyst at HDFC Securities. He doesn't hold any position in the stock. Views are personal.