Asian Paints: How to play a channel
Asian Paints
The Chart set up
- Since Oct 2022 the stock has been trading in a channel
- chart is not strong but with crude prices stabilizing at lower side it favors the sector as oil is one of the major raw material.
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Trading plan
One way to trade this is : Wait for the stock to give a sustained breakout from the channel. Ideally a 3 day close beyond the channel limits should be good cue. Then play for the size of the channel in that direction (roughly 150-180 points in the direction of breakout can be looked as target in this case)
Second way to trade this
Play for a Non directional trade
The limits of the channel are roughly 3240-3244 on the upside and 3018-3030 on the downside
Given the set up, consider a short strangle strategy to start with.
Sell 3250 Call and
Sell 3000 Put
In case stock moves out of range, have a plan to Adjust your strategy to a directional one.
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Understanding reward potential and risk profile
In scenario 2:
The Strike Price chosen covers the known risk (Channel limits)
It provides a profit potential of approximately 13400 per strategy lot (approximately 11.5% ROI on margin requirement). Take advantage of time decay in case the stock stays within the range.
In addition, there is in built protection against loss for a fall up to 2933 on the downside and 3317 on the upside till 25 Jan 2023 expiry day.
This should give ample scope to adjust strategy in case stock moves out of range.
__________________________________________________________________________________________________________________________
Do let me know if you find the analysis and insights helpful.
To trade with me Like and Follow for more trading ideas like these...!!!
Take care & safe trading...!!!
Disclaimer
- The view expressed here is my personal view
- Past performance is not a guarantee for future predictions
- I have been wrong in the past and can be wrong again in future too
- Use this for educational purpose
- Any decision you take, you need to take responsibility for the same
- It's your hard earned money. Treat it wisely
- Trade / Invest keeping in mind your trading style, goals and objectives, time horizon & risk tolerance
- if trading in F&O, understand that F&O trading involves risk
- Do take proper risk management measures
- Do your own analysis and consult your financial adviser if need be
The Chart set up
- Since Oct 2022 the stock has been trading in a channel
- chart is not strong but with crude prices stabilizing at lower side it favors the sector as oil is one of the major raw material.
___________________________________________________________________________________________________________________________
Trading plan
One way to trade this is : Wait for the stock to give a sustained breakout from the channel. Ideally a 3 day close beyond the channel limits should be good cue. Then play for the size of the channel in that direction (roughly 150-180 points in the direction of breakout can be looked as target in this case)
Second way to trade this
Play for a Non directional trade
The limits of the channel are roughly 3240-3244 on the upside and 3018-3030 on the downside
Given the set up, consider a short strangle strategy to start with.
Sell 3250 Call and
Sell 3000 Put
In case stock moves out of range, have a plan to Adjust your strategy to a directional one.
____________________________________________________________________________________________________________________________
Understanding reward potential and risk profile
In scenario 2:
The Strike Price chosen covers the known risk (Channel limits)
It provides a profit potential of approximately 13400 per strategy lot (approximately 11.5% ROI on margin requirement). Take advantage of time decay in case the stock stays within the range.
In addition, there is in built protection against loss for a fall up to 2933 on the downside and 3317 on the upside till 25 Jan 2023 expiry day.
This should give ample scope to adjust strategy in case stock moves out of range.
__________________________________________________________________________________________________________________________
Do let me know if you find the analysis and insights helpful.
To trade with me Like and Follow for more trading ideas like these...!!!
Take care & safe trading...!!!
Disclaimer
- The view expressed here is my personal view
- Past performance is not a guarantee for future predictions
- I have been wrong in the past and can be wrong again in future too
- Use this for educational purpose
- Any decision you take, you need to take responsibility for the same
- It's your hard earned money. Treat it wisely
- Trade / Invest keeping in mind your trading style, goals and objectives, time horizon & risk tolerance
- if trading in F&O, understand that F&O trading involves risk
- Do take proper risk management measures
- Do your own analysis and consult your financial adviser if need be
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