Stock Strategy: Consider going long on HCC, short on JP Associates :: Business Line

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JP Associates (Rs 76): The long-term outlook remains negative for JP Associates. Only a close above Rs 132 will change the outlook to positive. In the short term, the stock is likely to move in a slightly broader range of Rs 87-62.5. The stock finds immediate support at Rs 70 and resistance at Rs 82.

F&O pointers: The JP Associates November futures added fresh short positions on Friday. Option trading indicates a negative bias, as puts witnessed unwinding of open interest positions. At the same time, calls added fresh positions.

Strategy: Traders could consider going short on JP Associates. The stop-loss can be placed at Rs 80 for an initial target of Rs 73 and then Rs 70. This strategy is for traders who can stomach high risk since JP Associates is a high beta stock, and will swing more than the benchmark index.

Traders could also consider (selling) writing 80 call on JP Associates. It closed on Friday at Rs 1.10. The maximum profit is the premium collected, while the loss could be unlimited if JP Associates moved sharply above Rs 80 at the time of expiry. Market lot is 4,000 shares a contract.

Hindustan Construction (Rs 28): The long-term outlook remained negative for Hindustan Construction Company (HCC). However, in the short-term, the stock could see some resilience. The stock now finds immediate resistance at Rs 34 and support at Rs 27.

F&O pointers: The Hindustan Construction Company November futures added fresh short positions on Friday. Despite that the stock is moving up. While option trading is not that active, cues available from it indicate that Rs 27.5 could act as a strong support (as that call witnessed unwinding of open interest positions).

Strategy: Traders could consider going long on Hindustan Construction, keeping the stop-loss at Rs 27.5 for an initial target of Rs 32. Trail the stop-loss so as to protect profit potential. In case JP Associates opens on a positive note on Monday, investors can keep the stop-loss at day's opening for the recommended target. Market lot is 8,000 shares a contract.

Note: Both the strategies are for traders who have a penchant for risk, as the market lot is high.

Follow-up: We had recommended a short on Tata Global Beverages and VIP Industries. The latter achieved our initial target. The strategy on Tata Global is still in the money. As mentioned in the last column, the stock is a slow mover. Traders could consider holding on to the position with the mentioned stop loss.