The short-term outlook for the stock of State Bank of India (SBI) (₹737.20) is sideways. Immediate support and resistance are at ₹713 and ₹780 respectively. It is likely to move in a broader range of ₹650-850 in the medium term. A break from this price band will set the direction for SBI.
If the stock manages to surpass ₹850, it can move over and above its high of ₹912. But if SBI dips below ₹650, it could see a strong correction to ₹505, which we feel may not happen. With key triggers (Q3 result, and RBI rate cut) behind, we expect the stock to move in the aforementioned range with upward bias.
F&O pointers: SBI April futures closed at ₹739.75 against spot price of ₹737.20, signalling existence of long positions. Option trading indicates that the stock could move in the ₹650-900 range.
Strategy: Buy 780-strike call of March that closed with a premium of ₹13.70. The maximum loss would be the premium paid (₹10,275 as the market lot is 750 shares) and that would happen if the stock fails to cross ₹780. The break-even point is at ₹793.70.
Traders could aim for an initial target of ₹30. If the premium rises to ₹20, keep the stop loss at ₹15 and trail it as the premium goes up to protect profit. Hold the position for at least three weeks for better chances of making profits.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.
