Cipla stock shows strength on charts, adopt Bull Spread: Nandish Shah

Cipla share price: The short-term trend turned positive as Cipla stock price closed above its 5 and 11 day EMA

BULL SPREAD Strategy on CIPLA

Buy CIPLA (27-FEB Expiry) 1500 CALL at Rs 20 & simultaneously sell 1560 CALL at Rs 6.5

Lot Size: 325

Cost of strategy: Rs 13.5 (Rs 4,388 per strategy)

Maximum profit: Rs 15112 if CIPLA closes at or above Rs 1,560 on 06 Feb expiry

Breakeven Point: Rs 1,413.5

Risk Reward Ratio: 1: 3.44

Approx margin required: Rs 17,000

 

Rationale:

 

>> Long build up is seen in CIPLA Futures, where we have seen 4 per cent rise in the open interest on the day when Cipla share price rose by 2 per cent on Thursday. 

>> The short-term trend turned positive as Cipla stock price closed above its 5 and 11 day EMA. 

>> Pharma stocks are looking strong on the short term charts. 

>> Momentum Oscillators like RSI and MFI are in rising mode and placed above 50 on the daily chart, indicating strength in the current uptrend.

   

Note: It is advisable to book profit in the strategy when ROI exceeds 20 per cent.

 

===============  Disclaimer: Nandish Shah, Senior Technical/Derivative Analyst at HDFC Securities. Views expressed are his own.