Nandish Shah recommends a Bull spread on Amara Raja for January series

According to Nandish Shah of HDFC Securities, the stock has broken out on the daily chart with higher volumes to close at highest level since December 10.

Bull spread Strategy on Amara Raja Batteries
 

Buy AMARAJA BATTERIES Jan 650 CALL at Rs 14 and simultaneously sell 670 CALL at Rs 7

Lot Size 1000

Cost of the strategy Rs 7 (Rs 7,000 per strategy)

Maximum profit Rs 13,000 if Amaraja batteries closes at or above 670 on January 27 expiry.

Breakeven Point Rs 657

Rationale:

• We have seen first sign of long build up in the Amaraja battery Futures during the January series till now, where we have seen 2 per cent rise in the Open Interest with price rising by 4 per cent.
• Stock price has broken out on the daily chart with higher volumes to close at highest level since December 10
• Short term trend is bullish as the stock price is closed above all important short-term moving averages.
• RSI Oscillators is placed at 60 and sloping upwards, indicating strength in the current uptrend.

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Disclaimer: Nandish Shah is a Senior Derivative & Technical Analyst at HDFC Securities. He doesn't hold any position in the stocks.