The long-term outlook remains positive for the stock of Eicher Motors (₹3,355.10) and will remain bullish as long as it stays above ₹2,280. However, in the short-term, the stock may face some headwinds after registering its all-time high of ₹3,513.70 (August 25). The stock finds an immediate support at ₹3,160 and the next one at ₹2,945. A close below the latter has the potential to change the medium-term outlook to negative for Eicher Motors. On the other hand, if the stock sustains the current trend, it has the potential to reach ₹3,850.
F&O pointers: Eicher Motors September futures, at ₹3,355.40, commands little premium over the underlying close of ₹3,355.10. However, the counter witnessed a strong rollover of 94 per cent from August to September series. Open interest also witnessed a steady build up from 1.4 lakh shares to 33.73 lakh shares. This signals the existence of long positions. Option trading indicates a movement in the range of ₹3,000-3,500 for Eicher Motors.
Strategy: Even though the major trend is bullish, the stock looks to see a short-term dip. So, we advise traders to consider going short on Eicher Motors for a target of ₹2,945. While initial stop-loss can be placed ₹3,440, it can be lowered to ₹3,336 if the futures dips below ₹3,250. Stop loss can be further shifted to ₹3,240 if price falls below ₹3,100.
We expect the stock to be volatile since it will announce its sales figures for August on September 1 or 2.
This strategy is for traders who can understand the risks involved in shorting futures and can withstand wild swings. Traders should bear it in mind that trading in futures involves higher margin commitments and can cause heavy losses if the trend goes against our prediction.
Follow-up: Traders can book profits on IEX call options at ₹0.5. We had advised traders to sell IEX 190 call option at a premium of ₹3.25.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.