'Fresh base for USD/INR at 71.5, further dip will be a buying opportunity'
Trend is intact but mild pause can be expected before the reiteration of upmove.
February 25, 2020 / 10:26 AM IST
Rudra Shares and Stock Brokers
History repeats itself and so does the price pattern. Amid all noise and news flow, price has all the information and first information. For the last two weeks we have been repeatedly making it to the notice that the current ongoing scenario is a mirror image of what happened in the month of Nov-Dec 2019 and a big move on the upside will not be ruled out.
The pattern has finally matured and a sharp move on an upside has been witnessed in the previous week. The currency pair has finally touched the 72 mark and is trading with decent gains.
With this sharp up move certain major changes are shaping up for the currency pair on positional basis. On the weekly chart, prices were resting on 20 week moving average and now the bulls have taken the charge from there indicating that the consolidation process is over and trend is developing on an upside. Short term moving averages are developing a positive curve suggesting that up move could extend in days to come. On a daily time frame, the currency pair is facing the falling trend line resistance which could act as temporary halt for the bulls and some breather can be seen.
Though, the breakout has is in action but it’s not prudent to chase the running bulls at current levels. The trend line is acting as a mild resistance and prices are likely to show respect towards as it’s approaching there for the first time. Trend is intact but mild pause can be expected before the reiteration of upmove.
Momentum indicators have started trading in a bullish zone after a long time indicating that bulls have tightened the grip. One of the major changes that have taken place is that, the base for the currency pair has shifted upward from 71.10 to 71.50 which will act as a major factor in formulation of trading strategy.
Any dip above this level will act as a buying opportunity for traders and instead of chasing the breakout more focus should be placed on base price.
The bullish move of the last few days could attract the attention of the Reserve Bank of India and intervention on its part can be seen. Considering the overall perspective it’s prudent to trade with positive bias. 71.50 to 72.10 is emerging as an expected trading range for next few days.
Traders can go with bull put spread where 71.75 PE can be sold at 0.0675 and to hedge the position 71.50 PE can be bought at 0.0225 simultaneously. Strategy would enable the trader to get the premium of 0.045 paise with limited risk.
Note: Option premium mentioned are based on closing price as on February 24 of 28th February contract.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.