Cummins India -Gladiator Stocks: Series 9.0 :: ICICI Securities, report

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Technical view Strategy: Buy Cummins India in the range of | 870.00–890.00 for a target price of | 1070.00 with a stop loss below | 795.00 on a closing basis The share price of Cummins India embarked upon a secular uptrend since 2009 and continues to stride northwards in a rising peaks and troughs fashion on the long term price charts. The sideways consolidation in price over the last ten weeks provides fresh entry opportunity to ride the ongoing uptrend Key technical observations ¾ The share price has been in a consolidation over the past 10 weeks and is expected to resume its larger up trend offering a fresh entry opportunity ¾ The entire rally since February 2014 has occurred in a well defined rising channel as highlighted in the adjoining weekly price chart. It indicates a well structured uptrend indicating sustained buying emerging at elevated levels and at regular intervals ¾ Earlier, the stock rallied to its life-time high of | 955 during November 2014 and, thereafter, entered a secondary corrective phase to work off the short-term overheated conditions. The price and volume behaviour during the 10 weeks consolidation carries all the credentials of a healthy consolidation and indicates a higher base formation that is likely to act as a launch pad for the next up move over the medium term ¾ At the December 2014 low of | 810, the stock retraced its preceding up move (| 645 - 955) by only 50%, which also coincided with the rising 21-week moving average, that has historically acted as a key support for the stock during secondary corrective declines. The stock is seen resolving higher after forming a basing pattern around the confluence of the key technical support (| 800) suggesting resumption of upward momentum ¾ Time wise, the previous up move from October 2014 low of | 645 to November 2014 high of | 955 took seven weeks while the stock has already spent 10 weeks in the current consolidation retracing just 50% of the preceding seven-week rally. Larger time consolidation and limited price correction is the primary indicator of a healthy corrective action and highlights the underlying strength in the price structure ¾ Among momentum oscillators, the 14 week RSI is seen taking support at its short term trendline indicating the inherent strength in the trend Conclusion: We expect the stock to embark upon its next up move and head towards | 1070 in the medium term, being the higher band of the rising channel in placed since February 2014, thus it provides a good reward/risk setup to ride the ongoing uptrend

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