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Thursday, Jun 16, 2005

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Small reversal likely in Bharti Tele, Dr Reddy's

B. Venkatesh

THE following strategies are based on Wednesday's trading in the derivatives segment on the NSE.

These strategies are constructed to take advantage of small reversal in futures prices. The positions may run counter to the primary trend. Protective stops are, hence, important.

If futures price gaps down on Thursday so as to trade 2-3 points below the recommended entry price, traders should enter the position after the price breaks below the 5-minute low. If the futures price gaps up and then triggers the recommended entry level, the protective stop should be placed at day's high at the time the position is initiated, if that price is higher than the stop-loss level recommended below.

Option-based strategies on these positions will not be optimal because the price targets are not far away from the recommended entry levels.

Bharti Tele: Sell June futures if it trades below 239. The downside target is 236-234. Place the protective stop at 243.

The open interest position is about 20 per cent of the market-wide limit. The minimum order size is 1000 units.

GAIL: Sell June futures if it trades below 221. The downside target is 219-217. Place the protective stop at 224.

The open interest position is about 30 per cent of the market-wide limit. The minimum order size is 1500 units.

Dr Reddy's Labs: Sell June futures if it trades below 734. The downside target is 729-726. Place the protective stop at 739.

The open interest position is about 15 per cent of the market-wide limit. The minimum order size is 400 units.

Sun Pharma: Sell June futures if it trades below 563. The downside target is 559-557. Place the protective stop at 567.

The open interest position is about 10 per cent of the market-wide limit. The minimum order size is 450 units.

Satyam Computer: Sell June futures if it trades below 478. The downside target is 476-474. Place the protective stop at 482.

The open interest position is about 15 per cent of the market-wide limit. The minimum order size is 450 units.

(The opinion expressed in this column is based on technical analysis. There is risk of loss in trading.)

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