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Bear spread strategy on Asian Paints by Nandish Shah of HDFC Securities

The stock price has broken down on the daily chart with higher volumes where it closed at the lowest level since 03 November

Topics
Asian Paints | HDFC Securities | Markets

Nandish Shah  |  Mumbai 

Asian Paints: Volumes driven by strong distribution; low-end products
Oscillators like RSI and MFI are showing weakness in the stock.

Buy Asian Paint 2160 Put at Rs 35 & simultaneously sell 2100 Put at Rs 14

Lot Size 300.

Cost of the strategy Rs 21 (Rs 6300 per strategy)

Maximum profit Rs 11700 If Asian Paint closes at or below 2100 till 26 November expiry.

Breakeven Point Rs 2139

Rationale:

  • Short build up is seen in the Futures’ where we have seen 10% rise in the Open Interest with price falling by 1.5%;
  • Stock price has broken down on the daily chart with higher volumes where it closed at lowest level since 03 Nov;
  • Short term trend of the stock turned negative where stock price has closed below its 21-day EMA;
  • Oscillators like RSI and MFI are showing weakness in the stock.

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

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First Published: Fri, November 20 2020. 08:05 IST
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