F&O Stock Strategy: How to trade Aditya Birla Fashion and Retail, JSW Steel

Benchmark indices Nifty and Sensex were trading marginally higher on Wednesday driven by contributions from Reliance, Infosys, ITC and Hindustan Unilever.

Nifty has rallied nearly 5% in the current calendar year while Sensex has jumped approximately 4% in the same period.

In terms of FII positioning, the FII long-short ratio in index futures has dipped from 53% to 28% in May so far as they have been net sellers in the cash segment to the tune of Rs 35,530 crore. However, they have been net buyers in the stock futures segment and the FII cash selling has been completely absorbed by the DII buying to the tune of Rs 34,000 crore.

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

ABFRL’s Trendline Breakout Sparks Optimism

The stock of Aditya Birla Fashion and Retail has given a horizontal trendline breakout on Tuesday. This breakout was accompanied by a noteworthy surge in trading volume, reaching nearly three times the 50-day average volume. Tuesday’s total volume of nearly 197 lahks far exceeded the last 50-day average volume of 75 lahks. Furthermore, the stock exhibited substantial bullish candle on the breakout day, further reinforcing the strength of this upward movement.





Currently, the stock is trading above its short and long-term moving averages. These averages are in a rising trajectory and the desired sequence, suggesting the trend is strong. The daily RSI is in a super bullish zone, and in a rising trajectory as per RSI range shift rules. Moreover, the other volume-based indicators like OBV and Money Flow index are also very strong.

The derivative data aligns with the prevailing bullish chart structure. The May future has surged by 6.7%, and cumulative open interest of current, next and far series has surged by nearly 4%. This indicates overall long build-up.

Option Open Interest data clearly indicates bullish momentum in the stock.

Hence, we recommend accumulating the stock in the zone of Rs 282-280 with a stop loss of Rs 272 level. On the upside, it is likely to test the level of Rs 295, followed by Rs 302 in the short term.

Also read: F&O Talk: Sudeep Shah of SBI Securities shares notes from his Nifty, Nifty Bank playbook

Nifty Metal Index Surges nearly 4%, JSW Steel Gives Trendline Breakout

On Tuesday, Nifty Metal strongly outperformed the frontline indices as it surged nearly 4%. It has marked a fresh all-time high above the psychological level of 10,000 mark. On a daily scale, it has formed a sizable bullish candle. The ratio chart of Nifty Metal as compared to Nifty is at 119-month high, which shows sustained outperformance. Most noteworthy is that the majority of stocks from the metal space have ended on a positive note.

The stock of JSW Steel gave a horizontal trendline breakout on Tuesday. This breakout was confirmed by above-average volume. Along with this breakout, Mansfield’s Relative Strength indicator surged above zero line for the first time after 170 trading sessions. This shows that the stock has just started outperforming the broader market, i.e. Nifty 500.





Among the momentum indicators, the daily RSI has surged above 60 mark and is in rising mode. The daily MACD stays bullish as it is quoting above its zero line and signal line. The MACD histogram suggests pickup in upside momentum. The current derivative data is in sync with the existing bullish chart structure. The May futures have seen a substantial uptick of nearly 4%, while the cumulative open interest across the current, next, and far series has surged by 1%.

A significant concentration of call open interest is evident at the 950 strike. While substantial open interest on the put side is concentrated at the 900 strike. Delving into the options chain, there has been a discernible accumulation of long positions from 930 to 950 Call strikes. Conversely, on the put side, there is noteworthy put writing observed from 970 to 870 strikes. This indicates bullish momentum in the stock.

These technical and derivative factors are aligning in favour of bulls. Hence, we recommend to accumulate the stock in the zone of Rs 925-915 with a stop loss of 890.

On the upside, it is likely to test the level of Rs 965, followed by 990 in the short-term.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)