Traders can deploy "long strangle" strategy on Nifty ahead of Budget 2023: Rupak De

“I would like to suggest a "long strangle" strategy for the budget, though it will be risky given the high premiums of the options. Besides, after a few days of consolidation, Nifty looks good for a directional move,” says Rupak De, Senior Technical Analyst at LKP Securities.

In an interview with ETMarkets, Rupak said: “Nifty could face some resistance near 18300, whereas on the lower end, support is visible at 17800. Any breakout in either direction would create a directional trend in the market,” Edited excerpts:

A flattish last week for Indian markets amid results from IT heavyweights. What led to the price action on D-St?
Indian equities remained subdued during the week as Nifty failed to provide any directional breakout. The lack of major news flow kept Indian indices in check.

However, the cooling domestic inflation and strong IIP number could provide some tailwind to the index on the last day of the week.

How is this week likely to pan out for Indian markets? Which are the key levels that one should be tracking?
On the weekly chart, the index formed a doji-like pattern, which signifies indecision. However, the Nifty sustained below the 50 EMA on the daily timeframe, confirming an ongoing bearish trend.

The resistance is visible at 18300, whereas on the lower end, support is visible at 17800. Any breakout in either direction would create a directional trend in the market.

Consumer Durable stocks took some beating ahead of the Budget. What could be the reason for the selloff?
The consumer durables sector has been sluggish this week as the Bureau of Energy Efficiency (BEE) revised standard is expected to raise refrigerator prices.

Also, fear of the further spread of a new variant of COVID has kept the prices of stocks like Voltas and Bajaj Electric weak during the week.

Any particular strategy which traders can deploy ahead of Budget 2023?
Since a lot of emotional speculation will be involved in the budget this time around, updates related to the budget may take the markets for a wild ride.

Therefore, I would like to suggest a "long strangle" strategy for the budget, though it will be risky given the high premiums of the options. Besides, after a few days of consolidation, Nifty looks good for a directional move.

Hence, risky traders may take long Strangle positions on Nifty

Trade:
Buy 1 lot Nifty 19th Jan, 18000 CE (cmp Rs.80)
Buy 1 lot Nifty 19th Jan, 17800 PE (cmp Rs.69)
Net outflow of Rs.149
TGT 200/250
SL 99

Top 2-3 trading ideas for the next 3-4 weeks?
Here are few trading ideas for the next few weeks -

M&M: Buy| LTP Rs 1327| Target Rs 1470| Stop Loss Rs 1270

The stock has given a consolidation breakout on the weekly chart, suggesting a rise in optimism for the stock. Besides, the price has been trading well above the 21 EMA on the weekly timeframe, suggesting medium-term positivity.

Besides, the momentum indicator RSI is in positive crossover on the weekly chart.

On the medium term, the stock may move towards 1470; on the lower end, support is visible at 1270.

Jindal Steel & Power Ltd: Buy| LTP Rs 610| Target Rs 650| Stop Loss Rs 590

Jindal Steel & Power witnessed a breakout from a falling trendline a couple of weeks ago, and since then, the stock has been forming higher high and higher low formations on the daily chart.

The stock has surpassed its previous week's high and is expected to continue rising towards 650 and higher. The momentum oscillator RSI is trending above the level of 60, which confirms the momentum is likely to pick up in the coming week.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)