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Bull spread strategy on Escorts by Nandish Shah of HDFC Securities

Escorts' stock price is trading above its all important moving averages
Bull Spread strategy on Escorts

Buy ESCORTS APRIL 700 Call at Rs 48 & simultaneously sell 740 call at Rs 35

Lot Size: 1,100.

Cost of the strategy: Rs 13 (Rs 14,300 per strategy)

Maximum profit: Rs 29,700 if Escorts closes at or above 740 on April expiry.

Breakeven Point: Rs 713

Rationale:

-- Long build-up is seen in the Escorts Futures’ where we have seen 14 per cent (Prov) rise in the Open Interest with price moving up by 7 per cent.

-- The stock price has given breakout on the daily chart by closing above the resistance level of 676

-- Primary trend of the stock is positive where the stock price is trading above its all important moving averages

-- RSI Oscillators has reached above the level of 50, indicating sustainability of the bullish trend

-- Auto, as a sector, looking good for the short-term

Disclaimer: Nandish Shah is a Technical & Derivative Analyst at HDFC securities. Views are personal.



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