Bajaj Auto – After touching an all time high at 1840 in late Feb 2012, the scrip corrected 22% with Auto as a sector lagging behind on a relative basis. The base before rally was formed at 1405 in early Jan 2012 and after the recent correction we are around the lower end of the band. It has been holding above the crucial mark of 1405 to form a higher bottom and evidence of today’s Bullish Piercing Line pattern adds to the significance of the level being a strong support.
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On the longer term scale, the scrip has been mean-reverting with a secular bull run and corrections in past have proved to be a good buying opportunity. Price movement has reached to a lower extreme on a statistical chart and is quoting near to a negative 2 standard deviation. Odds are high for a rebound from the current level and risk/reward is favorable.
A buy trade can be initiated in the range of 1450-1470, for a short term target of 1580 / 1650 and a stop below 1400.
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