Chart of the Day: F&O Stock Begins Rally Amid ‘Double Bottom’!

  • Stock Market Analysis
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Aayush Khanna/Investing.com - Investing.com

The market has been raging since the opening tick with all sectoral indices currently trading in the green zone, as of 2:23 PM IST. The large-cap Nifty 50 index is up 1.6% to 17,352 and one blue chip that is looking extremely good on the charts is SBI Cards and Payment Services Ltd (NS: SBIC ). The company is in the business of providing credit cards in India and is the largest player in its space (in terms of issued cards), having a market capitalization of INR 68,136 crores and currently trades at a TTM P/E ratio of 30.38.

The stock has disappointed investors in the last one year, delivering a negative return of 15.4%, compared to a 2.2% decline in Nifty 50 in the same period. But after today’s 2.41% rally to INR 737.5, the stock seems to be coming out of bears’ grip and looking to deliver a sharp rally on the upside.

Image Description: Daily chart of SBI Cards and Payment Services with volume bars at the bottom

Image Source: Investing.com

In a 1-hour time frame, the stock has delivered a clear breakout from a double-bottom chart pattern which is a reversal pattern and indicates an end of a downtrend. The breakout level was around INR 730 (resistance), and the current rate of INR 737 is noticeably above it which increases the probability of a daily closing above resistance.

Another sign in the favor of bulls is a short-term falling trendline has also been breached in today’s session as the stock gained momentum. The confluence of these two signs is finally painting a bullish picture on this counter and short positions from here might get in deep trouble. The nearest level to which the stock could rally is around INR 770, which gives a very good opportunity in the F&O space.

Long positions can also be initiated in a hedged way such as buying an ATM PE with long futures, going long on ATM CE and short on 770 CE, etc. The options chain data is also projecting a rally amid today’s breakout. 800 CE for the current monthly expiry is having the highest open interest (OI) of 193 contracts, making it a good resistance level.

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