Jai Thakkar of ICICI Securities Predicts Bull Run for Bank Stock: Expert Call Spread Strategy

Baishakhi Mondal

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Jai Thakkar of ICICI Securities Predicts Bull Run for Bank Stock: Expert Call Spread Strategy

Market Outlook: Kotak Mahindra Bank’s Bullish Trend

Kotak Mahindra Bank shares have recently signaled a significant bullish trend by breaking out of a symmetrical triangle pattern. This technical development suggests a potential continuation of the upward trajectory of the stock price, which has garnered the attention of market analysts and investors alike.

Technical Analysis and Indicators

Jai Thakkar, the Head of Derivatives and Quantitative Research at ICICI Securities, has emphasized the robustness of the current market momentum. The MACD (Moving Average Convergence Divergence) indicator is firmly in the ‘buy’ zone on both daily and weekly charts. Furthermore, with positive divergence observed, the likelihood of the stock continuing its upward movement is gaining traction.

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Proposed Trading Strategy: Bull Call Spread

In light of this favorable market condition, Thakkar recommends employing a bull call spread options strategy to capitalize on the anticipated rise in Kotak Mahindra Bank’s stock. Hereโ€™s a breakdown of the recommended strategy:

Option Type Strike Price Action Current Market Price (CMP)
Buy Kotak Bank 1840 CE Buy 1 lot Rs. 19.20
Sell Kotak Bank 1880 CE Sell 1 lot Rs. 9

Potential Profit and Risk Assessment

The transaction results in a total cost of 10.20 points, which translates to a maximum loss of Rs 4,080 (given a lot size of 400 shares). Conversely, the potential maximum profit from this strategy is estimated at 29.80 points or Rs 11,920. This setup offers a favorable risk-reward ratio of approximately 1:2.92, making it an attractive option for traders looking to engage with the stock.

Market Dynamics and Technical Insights

Thakkar notes that although Kotak Mahindra Bank faced some short positions at the start of the September series, it found solid support near the lower part of the symmetrical triangle. This support catalyzed long positions, providing a positive shift in market sentiment. The current put-call ratio (PCR) stands at 0.58, indicating an oversold condition, but has slightly improved to 0.60 following the breakoutโ€”suggesting potential for short-covering in the near term.

Key Price Levels and Outlook

The stock recently closed at Rs 1,831, exceeding significant resistance levels, including the maximum pain and revised maximum pain levels of Rs 1,800 and Rs 1,814, respectively. This breakout above the crucial Rs 1,800 mark signifies a positive bullish momentum. Moreover, Thakkar observed substantial unwinding at the 1,800 call strike level, with the next significant call open interest now clustering around the 1,900 mark. Accordingly, he recommends the bull call spread strategy between the 1,840 and 1,880 strike prices while remaining cautious of levels below 1,900 throughout the September series.

Conclusion

In summary, the technical indicators and market sentiment surrounding Kotak Mahindra Bank are leaning towards a bullish trend. By implementing a strategic options approach, investors can navigate this potential uptrend while effectively managing their risk profile. Always consider seeking expert financial advice before proceeding with any investment strategy, as market conditions can change rapidly.

Disclaimer: The views expressed herein are personal opinions of the author and do not necessarily reflect the views of the management or Moneycontrol.com. It is advisable to seek professional counsel before making any investment decisions.

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