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The stock of Punjab National Bank (₹166.2) rules at a crucial level and tests resistance at around ₹165. A conclusive close above ₹165 will trigger a fresh rally in the stock. In that event, it could go up to ₹187. A close above ₹215 will change the long-term outlook to positive, which could take the stock to new highs.
The PNB stock finds near-term support at ₹151. Only a close below ₹133 will change the immediate-term outlook to negative.
F&O pointers: The PNB August futures contract added fresh long positions in open interests on Friday along with a sharp surge in the share price, signalling bullish bet by traders. Option trading indicates strong support at ₹160 for Punjab National Bank.
Strategy: Traders can consider a bull call calendar spread on PNB. This can be constructed by selling ₹165-August-call option, which closed at ₹7.30, and simultaneously buying ₹165-September-call that closed with a premium of ₹9.95. The maximum loss in this strategy will be the net premium paid, which works out to ₹2.65/contract (or ₹5,300).
However, the profit potential will be unlimited in this strategy if the PNB stock surges sharply, post-August expiry. We advice traders to hold the position for at least four weeks and consider exiting the position if the loss touches ₹1,200.
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