I bought Birlasoft futures at ₹668 and am still holding it. Should I hold or exit the trade? – Animesh Hui

Birlasoft (₹571.45):  The stock has declined sharply over the past couple of weeks. The downswing started with  resistance at ₹750. It is currently trading at around ₹570.

Notably, the price region between ₹555 and ₹570 is a support zone. Also, the 50 per cent Fibonacci retracement of the prior uptrend coincides at these levels, making this a good support zone. Hence, there is a chance for the downtrend to get arrested at these levels.

Futures: Like the underlying Birlasoft stock, the August futures, after facing a quick sell-off over the past two weeks, is now hovering around a base. The price band of ₹550-570 supports  the contract.

We understand that the contract has fallen considerably from your buying price. However, you may consider holding the longs since it is trading near a demand zone.

Nevertheless, you should have a stop-loss in place. Also, note that the recovery might take time and you may have to roll-over to the next expiry if the rally does not occur before the expiration of August contracts.

So, if you can wait, we suggest you retain the long and place a stop-loss at ₹545. Because a breach of ₹550 can drag the futures to ₹480.

When the contract rallies past ₹600, revise the stop-loss to ₹550. Trail the stop-loss further to ₹590 when the price touches ₹630. Tighten the stop-loss further to ₹620 when Birlasoft futures touch ₹650. Exit at ₹670.

Send your queries to derivatives@thehindu.co.in

Related Topics