F&O Radar: Deploy Bull Call Spread in Divis Lab from potential bullish reversal

The stock of Divis Laboratories is trading near a potential breakout level of Rs 6,145, forming a double bottom pattern on the daily chart. The stock is currently in an accumulation phase, supported by significant trading volumes, indicating a shift in market sentiment towards bullishness.

“A positive divergence is evident, signaling a potential bullish reversal. If the price sustains above Rs 6,150, the breakout could propel the stock further, with upside targets of Rs 6,500 and Rs 6,600 as projected by the double bottom pattern,” said Mandar Bhojane, Equity Research Analyst at Choice Broking.

From a trend perspective, the price is trading above the 20-, 50-, 100-, and 200-day exponential moving averages (EMAs), indicating a strong bullish trend. Additionally, the RSI is trending upwards at 68, reflecting robust buying momentum and further supporting the likelihood of a breakout.


To manage risk effectively, a stop-loss at Rs 6,100 is advisable to mitigate potential market reversals, Bhojane added.

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Bull Call Spread

Traders may deploy Bull Call Spread to monetize gains from a potential market rebound. It involves buying and selling call options with the same expiration but different strike prices. The purchased call is typically in-the-money (ITM) or at-the-money (ATM), while the sold call is out-of-the-money (OTM). This strategy results in a net debit for the trader, as the cost of the ITM/ATM call is partially offset by the cash flow generated from shorting the OTM call.

(Prices as of November 25)

Below is the payoff graph of the strategy:

(Source: Choice Broking)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)