The short-term outlook for the stock of ITC (₹489.10) is flat to negative although the long-term outlook still remains positive. Only a close below ₹383 will alter the positive view on the stock. Yet, in the near term, the price could drop. Immediate support levels are at ₹466 and ₹440. A break below the latter will trigger a sharp slide.
F&O pointers: ITC August futures closed at ₹491 against the spot price of ₹489.10. Open interest also witnessed steady build-up. The premium and accumulation of open interests indicate build-up of long positions. However, the rally might not sustain.
Strategy: We advise traders to consider buying 490-put on ITC. This option closed with a premium of ₹10.05. As the market lot is 1,600 shares, this strategy would cost traders ₹16,080 which would be the maximum loss. The maximum loss will happen if ITC fails to drop below ₹490 on expiry.
On the other hand, a sharp fall can give good profits. The break-even point is ₹480. A fall below that level would yield positive returns. We advise traders to exit the position either at a profit of ₹8,500 or at a loss of ₹5,500. Hold the position for two weeks and can be reviewed later.
Follow-up: Ashok Leyland moved on expected lines and the strategy might have provided some profit opportunities. We advise those holding the stock to exit.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading