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I am holding Tata Motor 650 CE August call option at ₹29. The stock price is down drastically from the high of ₹665 to ₹634. Please advise on Tata Motor stock price targets and on when to exit the 650 CE – Kishore
Tata Motors (₹634): The stock has been in a steady uptrend since early April. It established a rally after taking support at ₹400. The stock closed above the key ₹600-mark in early July. There are no signs of a reversal, and the bull trend is intact.
This week, after hitting a fresh high of ₹665.40, the stock has now moderated to ₹634. However, as mentioned earlier, the uptrend is unbroken and the price dip is likely to be only a corrective one. From the current level, notable nearest supports are at ₹620 – its 20-day moving average (DMA) and ₹600. Also, ₹630 is a minor support.
Notably, the stock has rebounded several times off the 20-DMA since April. Thus, it is an important level and a fall below this may not happen. At the same time, Tata Motors’ stock could resume the uptrend after touching the 20-DMA. Broadly, the price band of ₹600-630 is a strong support band and the bulls can bank on this.
Given the above factors, we recommend holding the 650-call option, which is currently trading at around ₹16.
Considering the magnitude of the bounce off the 20-DMA in recent months, we project the stock of Tata Motors to appreciate to ₹680 in the short-term. Above this, ₹700 can be a hurdle. That said, Tata Motors’ share price might see a price dip after touching ₹680 and before rallying to ₹700.
Therefore, we suggest exiting the 650 CE when the stock price touches ₹680.
On the contrary, if the stock breaches the support at ₹600, it might open the door for a deeper correction, possibly to the ₹560-580 range. So, exit the position if Tata Motors’ share price falls below ₹600.
If the stock neither rallies to ₹680 nor slips below the support at ₹600 by August 18, consider rolling over the trade to September series as the time decay will start accelerating in the last two weeks before the expiry.
Send your queries to derivatives@thehindu.co.in
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