Granules India shares are indicating a bullish setup after a six-week of consolidation in the 405-422 range followed by a breakout. In the first two days of the April series, there has been a significant increase in buying interest for the 250 and 260 calls for April, with an open interest addition of nearly 4 million, indicating bullish momentum.
Avani Bhatt, senior vice-president, derivative research, JM Financial, recommends buying the April series 445 call option in the range of Rs 10-11, with a target of Rs 20.5, and advises maintaining a strict stop loss at Rs 7.25.
Holding period: 8 trading sessions Position: Buy April 445 CE at Rs 10-11
Target: Rs 20.5
Stop loss: Rs 7.25
Technical set up
Beginning January, the stock went through six weeks of consolidation in the 405-422 range followed by a breakout on the upside and a rally up to 480, Bhatt said.
"Recent market correction in the month of March saw the stock retrace it’s entire bullish move and re-test the support zones of 405 from where some green shoots are in the offing. On the daily charts, the stock has seen better volumes on positive days. Price action is positive and moved above all short term moving averages of 10-20-50 day EMA which is an encouraging development. RSI is supportive of the price action reverting back to mean levels from oversold territory, " Bhatt said.
Derivative set up
Rollovers from March for Granules stood at a decent 93 percent level. In the first two days of April series, significant buying interest picked up in 250 and 260 calls for April series with an open interest (OI) addition of nearly 4 million indicating a bullish momentum. Also a gradual support base is being formed around 440 levels, as puts of 440 and 430 strikes gathered writing bets with IV’s at each of these strikes moving south. April Futures witnessed a short covering to the tune of 2 percent.
Granules poised for Rs 460 target in three-four sessions
According to Bhatt, the technical and derivative parameters hint at a bullish set-up for Granules. "Breakout of the congestion zone of 438-440 has occurred and the stock is ready to move up to 460 in a very short time horizon of three-four trading sessions, while on a slightly longer time frame of six-eight weeks, the texture of the stock looks good to re-test its all- time high levels of 480."
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