Option strategy of the day | Bullish momentum continues in Bharat Electronics, buy 230 call option

Bharat Electronics Ltd shares continue to see long addition in the derivatives space along with a consolidation breakout above 220-221 levels, which affirms the bullish stance on the stock.

Arun Kumar Mantri, derivatives trader and founder of Mantri Finmart, suggests buying BEL April 230 call options (CE) in the range of Rs 5- 6.

Trade details:Position: Buy BEL April 230 strike CE

Entry: 5.5-6

Target: 10-13

Stop loss: 3.5

Holding period: Five-six trading sessions.

Technical view

“The stock is making repeated cycles of higher highs and higher lows on the daily charts and is continuously breaching the short-term resistances on daily basis. The RSI-technical indicator is exhibiting immense strength along with the Bollinger band (20,2) in the northward direction. On the other hand, the Parabolic SAR is always trading well below the current market price indicating the ongoing bullish momentum is likely to continue in the coming days, ” said Mantri.

There is also the formation of initial stage of Flag and Pole pattern on the intraday charts and a breakout is expected during the week above 228-230 levels. The support for the stock is placed at around 220-221 on the lower side.

Derivatives Data

“If we analyse the option chain, 225 CE of BEL April series has highest Open Interest of more than 8.1 lakh shares, indicating short covering may take place in the stock once the stock crosses and sustains above 225-226 in the coming trades,” Mantri said.  On the flip side, 220 PE has the highest OI affirming strong support area. The stock is expected to witness long formation followed by short covering in the options space. Short-term traders may look upon ATM CE of 230 for the short-term, Mantri said.

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