Tata Consultancy Services (TCS) (₹3,514.65) witnessed a strong rally on Friday. However, the long-term outlook will change positive only on a close above ₹3,758 – a strong resistance. But immediate resistance is at ₹3,588.

On the other hand, immediate support is at ₹3,433 and a major one at ₹3,122. Trend is uncertain at this juncture.

F&O pointer: TCS July futures closed at ₹3,509.50 and August futures at ₹3,531.25 against the spot price of ₹3,514.65. The discount of July futures is mainly on account of dividend (₹9, for which the record date is July 20).

The August futures indicate an existence of long positions. Option trading indicates that TCS can move in the ₹3,300-3,700 range. We don’t see any change in strike price due to dividend announcement, as it is less than 2 per cent of the current market price.

Strategy: Consider strangle options strategy on TCS using August contracts. This can be initiated by simultaneously buying 3600-strike call and 3400-strike put of August contracts that closed with a premium of ₹56.35 and ₹37.35 respectively. This will cost ₹93.7/lot (₹16,397.50 - market lot 175 shares). This would be the maximum loss which will happen if TCS is stuck between ₹3,400 and ₹3,600 till August expiry.

However, profit potentials are huge if TCS swings sharply in either direction. We advise you to hold the position for two weeks and review later. Exit if the profit touches ₹7,500. Keep the initial stop-loss at ₹3,500.

Follow-up: Hold Aurobindo Pharma; the stock is moving on expected lines. Last week, we had wrongly mentioned the strike as 1950 instead of 1920-strike. The 1920-strike would have changed as 1870-strike due to the dividend announcement. Investors can book profit on Mphasis.

Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading

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