What is the outlook for Canara Bank? Can I buy futures at the current level? – V Bhanu

Canara Bank (₹625):  The stock is in a long-term uptrend. Last week, it broke out of the hurdle at ₹620 and hit a record high of ₹632.90.

That said, the chart shows that Canara Bank’s stock did not see a strong follow-through rally after the breakout. While this does not mean that the stock cannot appreciate further or that there will be a bearish reversal, for derivatives traders, momentum is crucial. So, one should wait for a clear signal on the chart or a price at which the risk-reward ratio is attractive.

Note that the stock has a trendline resistance at ₹632. Similarly, Canara Bank May futures (₹630) has a barrier at ₹636.

So, before the next upswing, there is a possibility for the price of Canara Bank’s May futures to see a dip. The nearest support from the current level can be spotted at ₹620 and ₹610. If the contract slips below ₹610, the near-term outlook could turn bearish.

Given the prevailing conditions, we suggest staying out for now and sticking to the following recommendations. If Canara Bank May futures drop to ₹620, buy with a stop-loss at ₹605. When the contract moves above ₹636, tighten the stop-loss to ₹620. Raise the stop-loss further to ₹630 when the price touches ₹642. Book profits at ₹650.

But rather than seeing a dip in price, if Canara Bank futures recover from here and break out of ₹636, go long with a stop-loss at ₹628. Book profits at ₹650. Note that ₹650 is a potential resistance and there could be a fall off this level.

Importantly, note that Canara Bank’s futures and options contracts will undergo modification in lot size and price following a split in share price. This will be effective from May 15.

The split ratio is 5:1 and therefore the share price will be divided by 5. Similarly, the price of futures and the strike price of options contracts will also be divided by 5. Also, the lot size will be revised upwards from the current 1,350 to 6,750 shares per lot. So, the support and resistance price points will also change accordingly.

Send your queries to derivatives@thehindu.co.in

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