On an upside, traders can expect a target of 72.40 and even 72.70
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Traders expect the positive bias in the dollar-rupee to continue this week, with the Indian unit trading in a 71.40-72.40 range. Since October, the currency pair has been trading sideways and has shown decent consolidation at its 20-DMA (Day Moving Average), which acts as an equilibrium for prices in the short term.
A breakout after such consolidation suggests that the up move is likely to continue further till its previous intermediate top of Rs 72.40. The downside base has shifted upward to Rs 71.30 and any dip above this level is likely to be bought into.
RSI has started trending towards the bullish zone after two months of consolidation and prices are trading above all major medium and short term moving averages. Average directional index (ADX), which has been trading almost flat for the last few weeks, has now started sloping upwards, suggesting a new trending move is likely to take place.
Trading strategyGiven the breakout in the dollar-rupee, any dip is likely to act as a buying opportunity. Hence, we suggest adopting a 'Married put' strategy. Traders can go long in November futures at Rs 71.86 and buy a put option of 71.25 strike price at 0.025 paise. The long put will act as a stop loss in case of any fall. On the upside, traders can expect a target of Rs 72.40 and even Rs 72.70/$. The strategy would help traders reap maximum benefits of the breakout with limited downside risk.Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.LIVE NOW... Video series on How to Double Your Monthly Income... where Rahul Shah, Ex-Swiss Investment Banker and one of India's leading experts on wealth building, reveals his secret strategies for the first time ever. Register here to watch it for FREE.