F&O Stock Strategy: How to Trade Hero MotoCorp and NTPC

Indian major indices closed in the green for the second consecutive session on Tuesday, despite a range-bound trading day. Nifty Index It opened positively above the 25400 zone and after a slight slide in the initial hour.

The index regained strength and touched the areas of historical highs and stayed afloat in the second half of the session with consolidation in higher areas.

Analyst Sudeep Shah, Assistant Vice President and Head of Technical and Derivatives Research at SBI Securities, suggests how one should trade stocks that were in focus in the previous trading sessions based on technical and derivative data:

Hero MotoCorp trendline break sparks optimism

Hero MotoCorp Ltd stock has seen a breakout of the horizontal trend line on a daily scale. This breakout is confirmed by the previous 50-day average volume. Moreover, it has formed a sizeable bullish candle on the day of the breakout, which adds strength to it. The stock is far outperforming the blue-chip indices. Moreover, it has relatively outshone the blue-chip indices. Skilled Automatic index by a decent margin. As the stock is trading at an all-time high, all moving averages and momentum-based indicators suggest strong growth. bullish momentum in action. The daily and weekly RSI are in the super bullish zone as per the RSI range reversal rules. The daily MACD remains bullish as it trades above its zero line and signal line.

The derived data aligns with the predominant bullish chart structure. The September future is up 3.20 percent and the cumulative open interest The price of current, near and far series has also increased by 9.40 percent. This indicates an overall accumulation of long positions. There is a noticeable concentration of call open interest at the strike price of 6000, followed by the strike price of 6100. While significant open interest is seen on the put side at the strike price of 5900. Talking about option chains, from the strike prices of 6600 to 5900 CE, call purchases have been seen. While, on the put side, from the strike prices of 6200 to 5100, put sales have been seen. This clearly indicates bullish momentum in the stock.

Hence, we recommend accumulating stocks in the zone of Rs 5970-5940 with a stop loss at Rs 5770 level. On the upside, it is likely to test Rs 6250 level, followed by Rs 6370 in the near term.

NTPC shows a breakout of the descending channel

Shares of NTPC Ltd have seen a breakout of the descending channel on a daily scale. This breakout is confirmed by relatively higher volume. Currently, the stock is trading above its short-term and long-term moving averages. These averages are on an upward trajectory and are in the desired sequence, suggesting that the trend is strong.

Among the momentum indicators, the daily RSI is on the verge of crossing the 60 mark. The daily Stochastic suggests bullish momentum as %K is trading above the %D line. Additionally, the MACD line of the momentum indicator has crossed above the signal line, which caused the histogram to turn positive.

The derivative data also supports the overall bullish chart structure. The September future has increased by 1 percent and the cumulative open interest of the current, near and far series has also increased by 1 percent. This indicates an overall accumulation of long positions. Looking at the option chain, it is noticeable that there is a concentration of call open interest at the 420 strike price, while a considerable open interest is seen on the put side at the 410 strike price. Talking about option chains, from the 425 strike price to the 410 strike price, put selling has been seen. While, on the call side, the 420 and 425 strike prices have witnessed an accumulation of long positions. This clearly indicates a bullish momentum in the stock.

These technical and derivative factors are aligning in favour of the bulls. Therefore, we recommend accumulating the stock in the Rs 418-414 zone with a stop loss of Rs 403. On the upside, it is likely to test the Rs 440 level, followed by Rs 450 in the near term.

(Disclaimer:The recommendations, suggestions, views and opinions of experts are their own and do not represent the views of the Economic Times. The index regained strength and touched the all-time high zones and stayed afloat in the second half of the session with consolidation in higher zones.