The stock traded close to its strong resistance levels of 161 last Friday on back of lower delivery volumes. Delivery volume stood at 0.94 million shares (lowest in the current series) as against series average of 2.03 million shares. Lower than average delivery volumes at resistance levels indicate lower probability of any sustained breakout. % delivery volume on last Friday stood at 29.13%, lowest in the current series.
Despite the up move from a low of 150 levels to a high of 160 levels in the current series, no significant accumulation of open interest has been observed. On the contrary, closure of positions was observed as open interest declined to 26 million shares from a high of 26.94 million shares. Cost of carry too has been on a declining trend.
Dollar index has been gaining strength. Historical studies indicate the index has a maximum inverse correlation with the metal stocks. With further strength expected to continue to prevail in the dollar index, we believe the stock could see renewed selling pressure.
Strategy "Accumulate short positions in Hindalco in the range of Rs 160-161 levels for an immediate target of Rs 140 levels. We recommend holding positions with a stop loss placed at Rs 170 levels on a closing basis.
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