Buy Maruti Put Options for May (Strike Prices 1450, 1460, 1480 and 1500) Yen based benefits overstretched - 22nd April 2012

1) Maruti Suzuki has seen a tremendous rise of around 20% (maximum among its peers) in the last one month due to bounce back in the equity markets and decline in Yen against all major global currencies including Indian Rupee. The yen depreciation has provided benefits in terms of Interest expenses as payout would now involve paying less in Rupee terms. (See 1 Year Yen-Indian Rupee graph)

Yen to Indian Rupee graph (1 Year)

Maruti Suzuki Price Graph (1 Year)

2) On the flip side, domestic auto market is going through its worst slowdown. After a decade or so, the auto sales have declined last month. The amount of freebies offered by the companies failed to bring enthusiasm among car buyers.

3) Few hopes that may bring support to the car makers are interest rates cut by RBI in May 4 meeting along with fall in commodities including crude which may bring car buyers back to the buying spree.

4) In the context of it, we feel that the current rise in stock prices are ahead of fundamentals and anticipate correction. RSI which indicates sentiments in the stock is trading above 80 which indicates over-bought scenario.

5) One may buy Maruti Put options for May for Strike Prices 1450, 1460, 1480 and 1500. One may book loss if Maruti closes above 1620. The profits can be booked at the levels of 1480 and then 1420.

Wishing you a profitable trading!!!

Asian Paints is a sell on rise - 11th March 2013

Asian Paints - India's premier paint manufacturing company becomes a candidate for sell due to following reasons:

1) In 5Day chart, the stock is reaching another peak around 4830 from where it is likely to correct. (See Chart 1). The support in that case arrive either at 4725 and then at 4625. Also, RSI close to 80 indicates overbought levels.

2) In the daily chart, one may see that the chart is rising steeply from 4250 levels (28th Feb) with virtually no correction (Chart2). On joining the peaks, one may perceive another peak at around 4830-4850 Rs range. The support in that case comes at 4450.

3) Open Interest is up by 21% and price is up by 2% on day-to-day basis which is a bullish sign for the stock. But we are taking the bet to sell on rise because we have a view that it will soon enter into its resistance zone around 4850 from where it is likely to correct to 4650 Rs.

4) Hence, one may recommend selling stock around 4830-4850 Rs with stop-loss at 4950 and target levels of 4650 and 4400 Rs.

Sell Union Bank on rise - 10th March 2013

Union Bank of India is Public Sector Undertaking bank. The reasons why it becomes right candidate for "Sell on Rise"

1) After steadily fall from 280 Rs levels from 01st January, it found some support around 210. From these levels, it has risen sharply to 233. 

2) Around 236-238 Rs levels, a resistance is seen. Also the recent rally is not backed by strong volumes which indicate it is more of a short covering rally. (See Chart 1)

3) One may sell the bank stock around 236 with stop-loss placed at 243 - above 241 Rs resistance. One may place target price around 228 and then 224 where it is likely to find some support.

Sell PFC on rise - 10th March 2013

PFC (Power Finance Corporation) is India's premier Power Finance company by Govt of India. It is among Navratranas (Most precious companies by Govt of India). The reasons why these are marked as "Sell on Rise".

1) The stock after re-testing the highs of 222 on around 8th Feb has fallen steeply to 190 where it found a good support. It has revived since then but finds a strong resistance around 206 (Chart 1).

2) The stock is into multiple phases of resistance now- 206, 212 and then 222 Rs (Chart 1).

Chart 1

3) Open Interest has increased by 12% on day-to-day basis. The stock has depreciated by 1% even during favorable market conditions on Friday. 210 Feb Call has seen its premium down by 15% on rising Open Interest which again is a negative trigger for the stock.

3) The only grace factor for PFC is that the decline in stock is not supported with rising volumes which indicates that it could be just a stop-over before the next rise.

4) One may sell PFC around 208 with stop-loss can be placed above 212 Rs resistance levels. The first target can be placed at intermediate support of 196 and second one may be placed at the strong support of 190 from where it bounced back last time around.

Wishing you a great trading week ahead :)