HDFC Securities recommends Bull Spread on Bajaj Finance, MidCap Nifty

Nandish Shah, senior technical/ derivative analyst at HDFC Securities reckons that MidCap Nifty and Bajaj Finance have seen long build-up, and are favourably placed on the charts.

F&O trading strategy by Nandish Shah of HDFC Securities.

  BULL SPREAD STRATEGY ON MIDCP NIFTY  Buy MIDCP NIFTY (28-July Expiry) 14,900 CALL at ₹107 & simultaneously sell 15,000 CALL at ₹71  Lot Size 120  Maximum profit ₹7,680; if MIDCP NIFTY closes at or above 15,000 on 28-July expiry.  Maximum Loss ₹4,320; if MIDCP NIFTY closes at or below 14,900 on 28-July expiry.  Breakeven Point ₹14,936  Risk Reward Ratio 1: 1.78  Approx margin required ₹35,000  Rationale: 

• Long build up is seen in the MIDCP NIFTY Futures during the July series till now, where we have seen rise in open interest along with 2.5 per cent price rise.
• Short term trend remains strong as MIDCP NIFTY is placed above its important short-term moving averages.
• It is forming higher top higher bottom candle stick pattern on the monthly charts.
• RSI Oscillator is in rising mode and placed above 60 on the weekly and monthly chart.

BULL SPREAD Strategy on BAJAJ FINANCE  Buy BAJAJ FINANCE (28-July Expiry) 1050 CALL at ₹13.8 & simultaneously sell 1080 CALL at ₹5.25  Lot Size 750  Maximum profit ₹16,088; if BAJAJ FINANCE closes at or above 1080 on 28-July expiry.  Maximum Loss ₹6,412; if BAJAJ FINANCE closes at or below 1050 on 28-July expiry.  Breakeven Point ₹1,058.55  Risk Reward Ratio 1: 2.51  Approx margin required ₹27,000  Rationale: 

• Long build up is seen in the BAJAJ FINANCE Futures where we have seen rise in OI with price rising by 1.50 per cent.
• Short term trend of the stock is positive as it is placed above its 5 and 20 day EMA
• Stock price has broken out from the downward sloping trendline.
• RSI oscillator is in rising mode and placed above 60 on the daily and weekly chart, suggesting strength in current uptrend.

  Note : It is advisable to book profit in the strategy when ROI exceeds 20%.  (Disclaimer: This article is by Nandish Shah, Senior Technical/Derivative Analyst at HDFC Securities. Views expressed are his own.)