While the long-term outlook remains positive for the stock of Bajaj Auto (Rs 3,072), in the short-term the stock may face some rough ride. It finds an immediate support at Rs 2,985 and a conclusive close below that level has the potential to weaken the stock towards Rs 2,774. Only a close above Rs 3,265 will change the long-term outlook positive for Bajaj Auto. We expect the stock to move in a downward channel in the short term.
F&O pointers: Bajaj Auto January futures is trading with a good premium, indicating existence long positions. However, in the last few days, open positions is hovering around 25.5 lakh shares, signalling traders are not willing to go for a fresh long or short potions. Option trading indicates a range of Rs 3,000-3,200 for the Bajaj Auto.
Alternatively traders could also consider bear-put spread by buying the Rs 3,050-put while simultaneously selling the Rs 3,000-put. They closed with a premium of Rs 63.05 and Rs 44.20 respectively. That means, it will cost traders initially Rs 4,712.50 (Rs 18.85/contracts), as the market lot is 250 shares. This will be the maximum loss on can suffer in the strategy if Bajaj Auto stays or moves up. A profit of Rs 7,787.50 is possible, if the stock falls below Rs 3,000.
Follow-up: Hold ONGC contracts.