I’ve a long position on Tata Steel futures bought for ₹216. What is the outlook for the stock? Should I exit or hold?
Tata Steel (₹183): The stock has been on a decline for the last two weeks. It fell off the resistance at ₹193. But on Friday, after making a low of ₹180, it recovered well.
Note that there is a support between ₹180 and ₹182, on the back of which, the stock can rebound. So long as this support band holds, bulls will have a chance to regain ground. That said, a breakout of ₹193 will make the set up more favourable for the bulls.
With respect to futures, the August contract, too, now trading around ₹184, has a support band between ₹180 and ₹182. But it ought to surpass the hurdle at ₹195 in order to establish a sustainable rally. A breakout of ₹195 can trigger a rally to ₹210.
Given the above factors, you can hold the trade but place a stop-loss at ₹178. Because, a breach of the support at ₹180 can lead to a deeper fall, potentially increasing the loss. That said, once the contract rises to ₹193, we suggest exiting, though at a loss. You can go long again once the futures decisively breaks out of ₹195.
Shall I buy Godrej CP September futures at the current market price?
Godrej CP (₹940): The stock has dropped over 10 per cent so far this week. Consequently, it breached the support at ₹980, potentially opening the door for further decline. However, from the current level, there is a chance for a temporary rise. The scrip can appreciate to retest at ₹980.
Therefore, Godrej CP September futures (currently at ₹946) can also see an upswing to ₹990. So, you can consider going long. But initiate trade at ₹925 so that you can achieve a better risk-reward ratio. Place stop-loss at ₹905.
When the contract moves up to ₹970, tighten the stop-loss to ₹945. Exit at ₹990. But note that this is a counter-trend trade and carries higher risk.
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