Trading recommendations - June 19, 2005

ITC - this scrip has been a prolific investment recommendation and has rewarded buyers with above average appreciation in the last 4 months. Technical buffs may note the bullish chart pattern as can be seen from the higher tops and bottoms formation along the rising red trend-line. The recent bonus announcement has been somewhat below general expectations and we expect a marginal slide in the price pattern on unwinding from highly leveraged quarters. The technical supports are at the 1500 / 1435 & finally at the 1393 levels. We feel the patient trader / investor still has a major profit opportunity as buying on declines ( in a pyramid formation ) will yield superlative returns. As far as possible, buy the farthest series contracts available as they are deeply discounted to adjust for the loss of dividend which must inevitably afflict the f&o players.

Your call of action -

• Investors / cash segment players - Start buying from the 1500 levels and average lower in pyramid formation till the 1435 mark. Maintain a stop loss at the 1380 levels and expect to book profits at the 1780 + levels in the medium / long term ( or Rs 118 - 120 after the 10 : 1 split and 1 : 2 bonus ).

• Aggressive F&O traders - Buy the July futures ( quoting at Rs 28 discount to cash ) at the 1490 mark onwards and average at the 1460 levels in pyramid formation. If the August series get liquid by then, average finally at the 1435 in that series and hold with a stop loss at the 1400 mark. We expect profit taking at the 118 - 122 levels post split. Options players do not have much of choice available as the counter is illiquid.

• Derivatives contract size - Market lot = 150 shares. F&O margin = approx Rs 37,000 (subject to change daily )

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