ITC Limited (Long and Short Term Strategy View)Hi Everyone,
Here is my educational view on the ITC strategy for both Option traders and investors.
Firstly, the Technical view pattern:
1. As you can see in the chart, we can notice that it has formed reverse Cup and Handle, the cup has been formed and the handle is being formed now. A reverse cup and handle is a bearish mode and it may see further downfall as the market goes down (with the view of the US election in the next two weeks).
2. Buying interest is not much in ITC, to have a reversal we need to retest above 205 which is the strongest resistance point.
3. Trend - Bearish
4. Cup - Reverse cup
5. Depth of the cup - Usually a cup should fall 1/3 of the previous advance, and ITC has fallen more than 1/3 of its previous highs before March
6. Handle - The handle is currently being formed and expect short term volatility within the range of 158 - 180 for the handle to form. So we may see a jump up and down in the near term (1-2 weeks)
7. Volume - If we see any huge selling volume after the handle formation and breaking below 158 may lead to a further downfall towards 140-130
For Options Traders:
It is suggested to go with cash secured option trades and it looks a very risky bet for Options traders. Both sides may burn their money in the short term, but playing covered calls or puts will be the best scenario until we can see an accumulation spree.
For Value Investors along with Technical Analysis:
As always ITC is an evergreen company (I know what you are thinking, it is in the Cigarette business so it may not be 100% green company. I agree to this :) Its 50% revenues are generated from cigarettes and the other 50% is from FMCG, Q1 results have not been impressive due to lockdown and other restrictions. Q2 results may be better but the hotel business has affected very badly, so we may have to wait and watch on how the results will meet the expectations. Overall with a PE Ratio of 14 and a dividend yield of about 5%, it looks like an attractive investment.
The suggested Buy range is as below:
5% in the range of 150-160
15% in the range of 130-140
25% in the range of 125-130
25% in the range of 120-130
30% in the range below 120
All the above suggestions and advice is for educational purpose and not investment advice. Please do let me know If you would like me to analyze any other shares. I will keep you posted on the ITC updates as we go along.
Thanks!
