The long-term outlook for The Federal Bank (₹193.67) will remain positive as long as the price is above ₹157. The short-term outlook remains bullish. Immediate support levels are at ₹183 and ₹176. If the current trend sustains, the stock can hit ₹228.
F&O pointers: Federal Bank October futures closed at ₹195.05 against the spot price of ₹193.67. The premium indicates the existence of long positions. Option trading indicates a trading range of ₹175-220.
Event: The RBI will announce the key decision on interest rate on October 9. Currently, RBI’s repo rate is at 6.5 per cent. It is widely expected that the RBI is likely to maintain status-quo. However, if they surprise us with a rate cut, the market, especially banking stocks can react momentarily.
Strategy: Traders can buy 200-call on Federal Bank, which closed with a premium of ₹4.20. As the market lot is 5,000 shares, this trade will cost ₹21,000, which will be the maximum loss. This will happen, if Federal Bank fails to cross ₹200.
We advise traders to keep the initial stop-loss at ₹2 that can be shifted to ₹3.80 if Federal Bank opens on a positive note. The stop loss can be shifted to ₹4.20 if the premium rises above ₹4.75. Traders can aim for a premium of ₹5 as target.
Follow-up: As the stock of SBI Cards slid sharply, the strategy would have resulted in loss. Similarly, Titan call options would have also hit stop loss.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading