Will Infosys surprise D-Street on Friday? Here’s how to trade the stock

The stock has given a negative return in all the four quarters on the day of results. It fell a little over 8 percent in the first quarter of FY17 and about 2-3 percent in all the preceding quarters.

“This ‘IT’ giant is generally considered as a slow and steady mover; but, when it comes to quarterly results, we see the daily price range expanding by a fair margin,” Sameet Chavan, Chief Analyst- Technical and Derivatives, Angel Broking Pvt Ltd told Moneycontrol.

“If we consider past four quarterly results day, the stock prices have been falling after posting a day’s high in the initial reaction. But, on the last occasion, this corrective move only lasted to the result day as we saw a smart rally after a small consolidation around the 900 mark,” he said.

Investors who hold Infosys should continue holding the stock as most experts think that IT as a sector has bottomed out and should see revival soon. Although, the time horizon for investors should be more than 1 year.

Considering the overall chart structure, analysts are upbeat on the stock and are expecting Rs1030 – 1040 level in the near-term. “The ‘Risk – Reward’ is not favorable to initiate a fresh long at the current juncture. In last four occurrences, we witnessed a selling pressure in the counter post its quarterly results,” Jay Purohit, Technical & Derivatives Analyst at Centrum Broking Limited told Moneycontrol.

“Traders who are willing to create any fresh positions in the stock, should initiate fresh longs only on a decline towards Rs920 - 930 levels post its quarterly result. Traders are advised to keep a stop loss at Rs 875 on the closing basis,” he said.

Going by the buzz on D-Street we have collated views from different experts on how to trade TCS ahead of Q1 results:

Pritesh Mehta of IIFL Private Wealth

Multiple support point around Rs890-910 has been acting as a savior since March 2015. The same is placed near the midpoint of previous gann channel, which came into play in last week of June; as the stock reversed after marking a low of Rs921.

The third line of defence as per gann rule of 8 is also placed near Rs930. The confluence of support points indicates that downside is limited in Infosys. However, range bound movement since October 2016 also indicates that the stock has lacked buying impetus on the upside.

Post a rally of 4% in this week’s trade, in the near term, it can rally towards Rs1,030-1,050.

Navneet Daga is Head of Derivatives at IIFL Wealth

Options build-up suggest stiff hurdle zone of 1000 levels on the upside for Infy as maximum open interest to the tune of ~14 lakhs shares seen, while on downside stock has taken multiple support zone near 920 levels. Theta and Vega decay would be profitable for the strategy. Maximum Profit and Loss is fixed.

Short Iron Butterfly strategy on Infosys: July Series
4 Leg strategy with fixed profit and loss payoff.

Strategy: Sell 980 CE & PE at spread of 60 points (July series)
Buy 1040 CE & Buy 920 PE at spread of 17 points (July series)

Net current inflow 43 points
Max gain 43 points at 980 levels on July expiry.
Max Loss 17 points expiry above 1040 and below 920 levels.

Jay Purohit, Technical & Derivatives Analyst, Centrum Broking Limited

From last few quarters we are not, seeing huge swings in Infosys on result days; thus, going long in strangle/straddle may not be an ideal deal. At the same time, the implied volatility of the stock is already on lower side, which refrains us to form short strangle/straddle at the current juncture.

We would like to highlight few technical observations on the stock. The stock is moving in a broader range of 885 – 1040 from last eleven months and currently hovering in the middle of the same. In previous instances, 880 – 890 zone acted as a sheet anchor for the stock.

Sameet Chavan, Chief Analyst- Technical and Derivatives, Angel Broking Pvt Ltd.

Considering the positive structure along with rising volumes, we would advise holding long positions in the stocks.

In fact, in the case of a sustained move above Rs985 – 990 (which looks likely) post the result announcement, traders can look to buy the stock for the first target of 1030 and then it might test October 2016 highs of Rs1055.

Traders with a broader perspective can expect a breach of this hurdle (1055) in next few months to resume its previous multi-year uptrend.

Since this stock is known for its higher volatility and some whipsaw nature on the result day, it would be a prudent strategy to follow a strict stop loss below Rs920 on a closing basis.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decision.