Institutional Activity observed in GAIL but direction not clear - 24 June 2013

1) GAIL - India's leading gas exploration company in India - is a part of India's benchmark Index - NIFTY.

2) In the last one week, this stock has taken some major addition in Open Interest which indicates some major positions being taken by Institutions.

3) These positions are taken in July and August Futures. Both the futures contracts have added 10 Lakh shares in Open Interest on Friday. Total Open Interest stands at 20 Lakhs for July futures and August respectively.

4) It is advised to go for Straddle strategy where one may buy both 290 Calls and Puts for the stock for July / August and hold till 10th July.

5) Some major announcement is expected, which is usually precluded by such institutional activity. 

Contra Strategy - Buy Apollo Tyres around 60 with target of 65 Rs and stop-loss of 58.5

1) Apollo Tyres, after announcing the acquisition of Coopers tyres in USA has become the darling stock of shorters. From the levels of 90 Rs, it has declined to 61 Rs in a matter of week or so.

2) The bearish approach is due to the leverage that the company is taking to make this acquisition. Post acquisition, the debt ratio will be 1.9 which is high, considering the market sentiments now a days.

3) But technically and fundamentally, the correction is overdone now and one may see a bit of consolidation around the current levels. This is evident in today's trading, when stock managed to stay afloat among difficult conditions.

4) Derivatives data also indicate shorts being covered. Futures Open Interest has actually declined by 63 Lakh shares which is a positive indication.

5) One may create a favorable strategy in this counter by buying around 60 tomorrow morning and put up a stop-loss of 58.50 and target levels of 64-65 in next week or so. The risk to reward ratio is very attractive for the stock (at 1:2).

Ranbaxy - Sell on rise and buy on dips strategy - 19th June 2013

1) Ranbaxy has been in the news for several wrong reasons in the last few days. US Drug Authority ban, Daichi (its promoter) blame on previous promoters for company's mis-management has done no good for the company. Also, recent speculation that US Drug Authority (USFDA) may inspect some other plants of Ranbaxy put further question marks on company's future growth prospects.

2) Derivatives data for yesterday indicate huge build up on Short side. Around 4 Lacs new shares have been added on the futures side. Also, tremendous Put accumulation at strike prices of 300, 290 indicate the kind of levels traders have been anticipating in this counter.

3) Though technically on charts, a long term support has seen between 320-340 Rs range on 10-year chart. Also the stock has corrected steeply twice in the last few months. Further correction would require much larger force from the bears than the previous two correction. (View Chart)

Support Levels

Resistance Levels

4) Also, the shorts accumulated in derivatives segment, may go for cover up before expiry which may take the stock upward.

5) On the upside though, a resistance exists around 375-380 levels. The stock consolidated around these levels in the last 3-4 days before correcting again. These levels are the perfect resistance levels for the counter.

6) Hence, considering all bad news already open in the market, the further downside may be limited, though, upside too is not much to be excited upon, given the fundamental reasons which prompt exit at every rise in the stock.

7) Hence, we recommend buying the stock in the range of 335-340 Rs with stop-loss of 315 and target levels of 360 and 375. Similarly if it goes up from here, then one may sell it in the range of 360-365 Rs with stop loss of 385 and target levels of 340 and 330.

8) F&O traders can go sell both 300 Put and 380 Calls for June expiry and exit if it goes in-the-money.

Sell IDFC on rise around 142 with stop-loss at 148 and target of 136 and 131 - 11th June 2013

1) IDFC, govt backed infrastructure financing organization, has been correcting from 158 Rs levels to 140 levels today.

2) This selling though, seem not stopped right now.

3) Derivatives data indicates fresh call writing in 140 and 150 strikes. 1 Lakh shares in 140 call and 1.2 Lakh shares in 150 Call have been added. Premiums too have declined.

4) IDFC July futures have too seen strong build up on short side. The July futures have been trading at the discount to June futures which indicate short build up.

5) On the charts as well, the stock has broken two key support levels (Ref chart below) which indicates strong resistance on the rise.

6) Sell the stock on rise around 142-143 Rs levels with possible targets of 136 and then 131.