Nandish Shah recommends a Bull spread on Chambal Fert for December

The derivative analyst from HDFC Securities recommends buying December 400 Call and selling 430 Call based on the following four rationales.

Bull spread Strategy on CHAMBAL FERTILISERS

Buy Chambal Fert Dec 400 CALL at Rs 21 & simultaneously sell 430 CALL at Rs 10
Lot Size 1500

Cost of the strategy Rs 11 (Rs 16,500 per strategy)

Maximum profit Rs 28,500 if Chambal Fert closes at or above Rs 430 on 30 Dec expiry.

Breakeven Point Rs 411

Rationales:

• We have seen long rollover in the Chambal Fert Futures, where we have seen massive rise in the Open Interest with price rising by 5.4%.
   
• Stock price has broken out on the daily chart with higher volumes to close at highest level since 11-Oct.
  

 

RSI and MFI Oscillators are placed above 60 and sloping upwards, Indicating strength in the current uptrend.
 

Plus DI is trading above Minus DI while ADX line is placed above 25, Indicating momentum in the current uptrend.

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