The stock of State Bank of India (SBI) (₹598.15) rules at crucial level. One more conclusive close above ₹592 will confirm a bullish outlook for SBI. A close above ₹612 will trigger a fresh rally on the stock and that could take it to new highs.
The stock finds an immediate support at ₹574 and the major one at ₹557. We expect the stock to sustain the current bullish momentum.
F&O pointers: SBI witnessed a healthy rollover of 24 per cent to next month’s series. SBI September futures at ₹597.90 and October futures at ₹601.90 against the spot close of ₹598.15 signals rollover of long positions. Option trading (October series) indicates that the stock could move in the ₹580-650 range.
Strategy: Traders can consider a bull-call calendar spread strategy on SBI. This can be initiated by selling 600-call of current month and simultaneously buying the same strike of October expiry. These options closed with a premium of ₹4.60 and ₹17 respectively.
That means this will cost traders ₹12.40/lot or ₹18,600 (market lot of 1,500 shares), which would be the maximum loss if SBI fails to cross ₹612.40. Profit potentials are high if the stock stays at current level till the expiry of September contracts and rises sharply thereafter.
We advise traders to wait for at least two weeks and can be reviewed later. Initial stop-loss can be placed at ₹5 (combined position), as there is possibility of market turning volatile in the short term.
Follow-up: Stop-loss would have triggered on Asian Paints as the stock surged sharply contrary to our expectation.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading