I’m holding JSW Steel July futures at ₹940.70. Should I exit or roll over to next contract?
Palani Shanmugam
JSW Steel (₹889.45): The stock depreciated 4.8 per cent last week. Although there is a support at ₹886, given the current momentum, JSW Steel’s share price can extend the decline further. Consequently, the JSW Steel July futures can fall from its current market price. It closed at ₹890.5 on Friday.
The downtrend in July futures is likely to be arrested at ₹860, where a rising trendline might help the bulls’ fight against the bears. But even if the bulls succeed, translating to a rally, whether the contract can rise back to ₹940 before the expiration of July contracts is highly uncertain.
Note that, the market per se can witness higher-than-usual volatility this week because of the announcement of the Union Budget. So, rolling over your position to next month’s contract too will expose you to the risk of higher volatility.
That said, since there is a minor support ahead, rather than closing out the trade right away, you may place a stop-loss and wait for a potential corrective rally. Such an uptick can take July futures to the ₹905-910 price region. This up-move can be capitalized to reduce the loss. So, here is what you can do.
Hold the July futures long, but place a stop-loss at ₹875 and strictly adhere to it. If the contract rises to ₹905 on Monday or Tuesday, exit the trade.
However, if this rally occurs on Wednesday or later — post the announcement of Budget, do not exit at ₹905. An uptick after the event can lift the contract above ₹905, possibly to ₹950, a resistance. Hence, in this case, you can roll-over to August contract and liquidate the same at ₹940. Thereafter, consider fresh longs only after a breakout of the barrier at ₹950.
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