Shriram Finance, REC, IRCTC, Hindustan Aeronautics, PFC, and others had a fresh long buildup. Traders should analyze options for potential informed exposure.
, , were among five that witnessed a buildup of on Thursday.The buildup of fresh long positions can be seen when the stock prices move up and on the counter also moves upward. The signal is considered more reliable if the on the counter has also seen an increase. Open interest indicates that are likely to dominate the following counters.
REC's jumped 7.16%, and open interest saw a rise of 0.38%.
surged by 6.23%, and open interest saw an increase of 4.24%.
IRCTC rose 5.86%, and the open interest saw an increase of 0.25%.
stock rose 5.77%, and the open interest saw an increase of 0.58%.
Shriram Finance's gained 4.77%, and open interest saw an increase of 3.05%.
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Some additional checks would help traders in taking better trading decisions as they increase the probability of a follow-up of the upward movement in the stock price. First, if this fresh has come when the stock is very close to its , that increases the probability of the stock making an attempt to break its previous 52-week high.
Second, if this long buildup is accompanied by any bullish crossover, which means whether in the current up-move when the open interest has moved up the stock price has been able to cross either its 20, 50 or 100-day moving average.
Another couple of points which traders should keep in mind when taking a trade by looking at the matrix of buildup of long positions on the basis of open interest. Also check whether there is any extraordinary buildup of long positions in any out-of-money call option, especially any far-of-the-money call option. That indicates the probability of any informed person taking exposure through options.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
Source: Stocks-Markets-Economic Times