I bought Godrej Consumer Products May futures at ₹1,322. What can be the target and stop-loss for this trade?
Palani S
Godrej Consumer Products (₹1,310.35): The stock of Godrej Consumer Products was oscillating in the range of ₹1,180-1,270 since the beginning of February. But it broke out of the resistance at ₹1,270 in early March, opening the door for further rally.
Consequently, the May futures of Godrej Consumer Products surpassed the barrier it faced at ₹1,275. The contract marked a high of ₹1,368.95 on May 8 before declining.
Last week, the May futures moderated to test the resistance-turned-support of ₹1,275. Noticeably, the 20-day moving average coincided at this level. On the back of this support, the contract rebounded. It closed at ₹1,310.65 on Friday.
The overall trend is bullish and the recent rebound means the probability of a rally from here is high. But the price action indicates that the contract might face a resistance at ₹1,350, from where the price started to decline a couple of weeks ago.
Considering the above, hold the trade with a stop-loss at ₹1,265. But exit the position once Godrej Consumer Products May futures hit ₹1,345.
After liquidating the position, new longs can be considered again if there is a fresh breakout. But since May contract is nearing expiry, fresh buys can be made in June futures, which is currently trading at ₹1,319.10. The equivalent resistance in the June contract is ₹1,355.
If neither stop-loss nor target is hit in May contract before it expires, exit the trade. Buy June futures if it breaks out of ₹1,355. Target and stop-loss for this trade can be at ₹1,400 and ₹1,330 respectively.
Send your queries to derivatives@thehindu.co.in