Option strategy of the day| Bull run in Bajaj Auto backed by volume; buy 9,100 CE advised

Shares of Bajaj Auto Ltd have been on a bullish run from the past few weeks and trading well above the major moving averages on the daily charts. Around 11am on April 15, the counter was around the mid of the Bollinger band after some consolidation and is expected to move towards the upper range.

Arun Kumar Mantri, founder of Mantri Finmart, suggests a ‘buy’ a call option to capture the bullish momentum.

Buy Call Strategy recommended by Mantri

Position: BUY BAJAJ-AUTO APRIL 9100 STRIKE CE

Entry: On dips at Rs 185-190

Target: Rs 270-285

Stop loss: Rs 130

Holding period: 6-7 trading sessions.

Technical view

Mantri highlights that the stock has been making higher highs and higher lows on all time frames. The counter is exhibiting good volumes on every decline indicating the underlying strength. The technical indicator RSI is also showing bullish signs followed by major moving averages which are also pointing in the northward direction.

“There has been five consecutive session of minor profit booking in the stock and is now all set to reverse the short-term trend and again surpass the 9150-9200 levels in the coming 4-5 sessions. The price volume action is also supporting the recent moves where good trading activity is witnessed on every decline in the counter.”

Derivatives Data

As per Mantri, “Analysis of the the option chain, shows 9000 PE of BAJAJ-AUTO April series is having second highest Open Interest (OI) of more than 1.45 lakh shares indicating that the support for the counter is near the current market price and any dip towards 9000 mark will be good buying opportunity.”

“On the flip side, 9200 CE of the stock is having second highest OI indicating that the resistance is still away from the price which may provide good opportunity for the short-term trades to enter the stock. We expect the stock to witness long formation followed by seem good price volume action. Short term traders may look upon ATM CE of 9100 on declines for the short-term perspective with strict stop loss of 130 (premium), ” added Mantri.

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