Options strategy of the day | Escorts Kubota sees volume breakout, buy 3,040 CE recommended

Escorts Kubota shares' daily Relative Strength Index (RSI) has surged above the 60 mark for the first time in 114 trading sessions.

Escorts Kubota Ltd shares have given a downward sloping trendline breakout on the daily scale, supported by robust trading volume, indicating strong interest from market participants. It is further validated by the formation of a substantial bullish candle on the breakout day, underscoring the positive momentum.

Sudeep Shah, DVP and head of derivative and technical research at SBI Securities, recommends using this strategy to capitalise on the move in Escorts:

Position: Buy the 3040 April CE at Rs 80-85

Stop loss: Rs 50

Target: Rs 135-150.

Technical setup: Downward sloping trendline breakout

"Escorts Kubota Ltd has a downward sloping trendline breakout on a daily scale. This breakout was supported by robust trading volume and further validated by the formation of a substantial bullish candle on the breakout day, highlighting the positive momentum," said Shah.

Shah noted that the daily Relative Strength Index (RSI) has surged above 60 for the first time in the last 114 trading sessions. Additionally, the stock has risen above its short-term and long-term moving averages. The 20-day, 50-day, and 100-day Exponential Moving Averages (EMAs) have begun to trend higher, signalling a bullish outlook. "On the daily timeframe, the Average Directional Index (ADX) is at 20.87 and is rising, indicating strengthening trend momentum. Directional indicators remain in the 'buy' mode as Positive Directional Indicator (+DI) continues to stay above Negative Directional Indicator (–DI), further confirming the bullish sentiment."

Derivative Setup

The derivative data supports the prevailing bullish chart structure. Escorts April futures have surged by 4.52 percent, accompanied by a 2.5 percent increase in cumulative open interest across the current, next, and far series, signaling significant accumulation of long positions.

Regarding options, there is notable concentration of call open interest at the 3100 strike, with significant additions of open interest observed on the put side at the 2900 and 3000 strike prices.

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