Charts signal strength in Exide; Bull Spread Strategy ideal for Dec expiry

BULL SPREAD Strategy on Exide

Buy Exide Dec 28 expiry 300 CALL at Rs 7.40 and simultaneously sell 310 CALL at Rs 4.05
 

Lot Size: 3,600
 

Cost of the strategy: Rs 3.35 (Rs 12,060 per strategy)

Maximum profit: Rs 23,940 if Exide closes at or above Rs 310 on Dec 28 expiry.

Breakeven Point: Rs 303.35
 

Risk Reward Ratio: 1:1.99
 

Approx margin required: Rs 37,300

Rationale:

>> Long build up was seen in Exide Futures on Thursday where Open Interest rose by 9 per cent (Prov) and the stock gained 3.20 per cent.

>> Stock price has broken out on the daily line chart with higher volumes.

 

>> Stock price has been forming bullish higher top higher bottom formation on the weekly chart.

>> Oscillator like RSI and MFI are in rising mode and placed above 60 on the daily chart, indicating strength in the stock.

Note: It is advisable to book profit in the strategy when ROI exceeds 20 per cent.

Disclaimer: Nandish Shah, is technical and derivative research analyst at HDFC Securities. Views are own. He does not have any holdings in the stock.