F&O Radar | Deploy Broken Wing in ICICI Prudential to gain from bullish momentum: Hardik Matalia

ICICI Prudential Life Insurance shares are currently trading at Rs 666.05 and have been consolidating in a broad trading range following a sharp decline of nearly 34% from their peak.The stock is now displaying signs of a potential bullish reversal as it forms a Cup and Handle pattern on the daily timeframe—a classic bullish continuation formation that typically precedes a breakout rally.“The stock is currently on the verge of breaking out of this pattern. A sustained move above Rs 680 would confirm the breakout, indicating renewed buying interest and setting the stage for a fresh upward move,” said Hardik Matalia, Derivative Analyst at Choice Broking.

The Relative Strength Index (RSI) stands at 62.23 and is trending upward following a positive crossover, reflecting strengthening momentum and supporting the bullish bias.
Technically, ICICI Prudential shares are trading comfortably above their key moving averages, including the short-term (20-day), medium-term (50-day), and long-term (200-day) EMAs.

“This alignment of moving averages further validates the improving trend and suggests that the stock is regaining bullish traction across all timeframes,” Matalia added.

From a derivatives perspective, the highest Call Open Interest (OI) is seen at Rs 670, followed by Rs 680, indicating these levels as near-term resistance zones.

Matalia stated that a breakout above Rs 680 could lead to short covering and fuel further upside.

On the downside, the highest Put OI is concentrated at Rs 650, marking it as a strong support level. As long as the stock holds above this support, the positive bias is likely to remain intact.

“If ICICIPRULI successfully breaks above Rs 680 and sustains, the stock could potentially rally towards the Rs 725–Rs 750 range in the near term. A decisive close above this resistance zone would validate the Cup and Handle breakout and open the door for further upside in the medium term,” he added.

To play this bullish bias on the stock, Hardik Matalia suggests deploying a Broken Wing strategy for potential gains.

Broken Wing

The Broken Wing Options Strategy, specifically the Broken Wing Butterfly (BWB), is a variation of the classic butterfly spread, which is used to take advantage of directional market moves while reducing risk and cost. It is called a “broken wing” because one of the wings of the butterfly is intentionally unbalanced to create a skewed risk/reward profile.

This strategy lowers the initial cost or generates a credit, while limiting both risk and reward on one side of the trade, typically used to capitalize on small directional moves with defined risk.

(Prices as of July 7)

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)