F&O stock strategy: How to trade in Ashok Leyland and NALCO?

We spoke to analysts on how one should trade stocks that were in focus in the previous trading sessions based on derivative and :

Analyst Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research, told this to .

Ashok Leyland on verge of breakout

On May 3, the stock of Ashok Leyland marked a high of 205 and since then it has witnessed minor profit booking which halted near the 20-day EMA level and it coincides with the 38.2% Fibonacci retracement level of its prior upward rally (Rs 166.25-205). Thereafter, the stock witnessed a smart rebound and currently is on the verge of a horizontal trendline breakout on the daily scale.

The major trend of the stock is bullish as it is quoting above its short and long-term moving averages. These averages are in a rising trajectory and they are in the desired sequence, which suggests the trend is strong. The daily RSI is in the super bullish zone as per RSI range shift rules. The daily MACD stays bullish as it is quoting above its zero line and signal line. Further, the trend strength indicator, ADX is quoting above 36 level, which shows robust trend strength.

The derivative data aligns with the prevailing bullish chart structure. The May future has surged by nearly 3% and cumulative open interest of current, next, and far series has surged by 1%. This indicates an overall long build-up.

There is a notable concentration of CALL open interest at the 210 strike, followed by the 220 strike. While significant open interest on the PUT side is observed at the 200 strike. Talking about option chains, from 210 to 205 CE strikes have witnessed CALL buying. While, on the PUT side, from 220 to 200 strikes have witnessed PUT writing. This clearly indicates in the stock.

Hence, we recommend to accumulate the stock in the zone of Rs 205-203 with a stop loss of Rs 197 level. On the upside, it is likely to test the level of Rs 215, followed by Rs 223 in the short term.

NALCO rebounds strongly from support zone

On Tuesday, the Nifty Metal index stole the spotlight by significantly outperforming the frontline indices. It closed near the 9350 level, marking an impressive gain of almost 3%. Particularly noteworthy was the breakout observed in the ratio chart of Nifty Metal compared to Nifty, signifying a significant shift in momentum on the daily scale. Moreover, the daily Relative Strength Index (RSI) of the index surged above the crucial 60 mark, indicating increasing bullish momentum and sustaining an upward trajectory. Additionally, a majority of stocks within the sector concluded the day on a positive note, further underlining the sector's resilience and potential for continued growth.

The stock of has recently taken support near its 50-day EMA level (Rs 169) and it coincides with 38.2% Fibonacci retracement level of its prior upward rally (Rs 130.25-193.10) and witnessed smart rebound. On Tuesday, the stock ended near 190 level with a gain of over 7%. On a daily scale, it has formed sizeable bullish candle. Further, it has witnessed over 50-day average volume, which indicates strong buying interest from market participants.

The moving averages and momentum indicators are also supporting the overall bullish chart structure. The daily RSI has given a bullish crossover and it has surged above the 60 mark. The current derivative data is in sync with the existing bullish chart structure. The May futures have seen a substantial uptick of nearly 7%, while the cumulative open interest across the current, next, and far series has surged by 5.47%. This suggests a build-up of long positions, reflecting the prevailing optimism among market participants.

There is a notable concentration of CALL open interest at the 200 strike. While significant open interest on the PUT side is observed at the 190 strike. Talking about option chains, from 210 to 190 CE strikes have either witnessed CALL buying or CALL short covering. While, on the PUT side, from 200 to 180 strikes have witnessed put writing. This clearly indicates bullish momentum in the stock.

These technical and derivative factors indicate strong bullish momentum. Hence, we recommend to accumulate the stock in the zone of Rs 190-188 with a stop loss of Rs 182 level. On the upside, it is likely to test the level of Rs 200, followed by Rs 205 in the short-term.