The stock of Tata Chemicals (₹984.15) rules at a crucial level. The stock finds an immediate support at ₹880 and a major one at ₹788. The immediate resistance levels for the stock are at ₹1,025 and ₹1,085. A close above ₹1,085 will trigger a fresh rally. If the current trend sustains, the stock could reach new heights and has the potential to touch ₹1,400. We expect the stock to maintain the positive momentum in the near term.
F&O Pointers: The counter witnessed a rollover of 30 per cent, which is quite healthy. The June futures closed at ₹966.65 against May futures price of ₹976.45 and the spot price of ₹984.15. The discount of June futures for Tata Chemicals is mainly on account of the ₹17.50 dividend that the company announced and for which it fixed the record date as June 14. Option trading indicates that Tata Chemicals can move in the ₹900-1,100 range.
Strategy: Consider buying Tata Chemicals 1000-strike call of June series that closed with a premium of ₹17.15. As the market lot is 500 shares, the cost would be ₹8,575. This will be the maximum loss one can suffer, if Tata Chemicals fails to cross ₹1,000 before expiry.
Keep the initial stop-loss at ₹7.5 and shift it up to ₹15 on a close above ₹20. Traders, according to their risk profile, can keep the stop-loss after the option premium crosses over ₹22 to protect the profits. However, we advise traders to hold the position for two weeks at least and review later. Traders can aim at a target of ₹35-40.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading