Option strategy of the day | Consolidation breakout signals BPCL call option buy

The BPCL counter is making intraday highs even in volatile market conditions and is expected to test Rs 615-620 levels over the next three to four sessions, derivatives trader Arun Kumar Mantri has said

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BPCL shares have been on a bullish run for the past few weeks and are trading well above the major moving averages on the daily charts. The counter witnessed strong trading volumes in the last few sessions and is expected to surpass the near-term resistance levels of 610 on the daily charts.

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

Trade details:

Position: BUY BPCL MAY 610 STRIKE CE

Entry: 26-27

Target: 36-49

Stop loss: 16

Holding period: 4-5 trading sessions.

Bharat Petroleum Corporation Limited

Technical view

Mantri said, “The stock is looking very bullish on all timeframes and is hovering in the cluster of major moving averages. The counter is making intraday highs even in volatile market conditions. There is also an initial stage of formation of consolidation breakout and the stock is expected to test Rs 615-620 levels in the next 3-4 trading sessions. The support for the stock is placed around Rs 590-552 on the lower side while resistance is at Rs 620.”

Derivatives Data:

Based on option chain analysis Mantri highlights that 600 PE of BPCL April series has a strong Open Interest (OI) of more than 8.4 lakh shares indicating short covering may take place in the stock once the stock crosses and sustains above 610 in the coming trades. On the flip side, 610-620 CEs of the stock have the highest OI affirming support of breakout zones on the higher side.

“We expect the stock to witness long formation followed by short covering in the options space. Short-term traders may look upon ATM CE of 610 of next month of May series for the short-term perspective,” said Mantri.

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