Today is Friday; However, as markets closed on Thursday, it outperformed both major events while also navigating the weekly options expiration. The markets are having an immensely volatile week; Since the last trading day of the week has yet to unfold, the weekly bar is not yet complete. Apart from that, the main volatility enhancing events are; ie the Union budget, which is one of the most important domestic events, and the Fed rate announcement are out of the way.
During these volatile times, some stocks have shown very resilient performance regardless of the sectors to which they belonged. This commercial vehicle manufacturer is one such example. The overall auto sector has been seen as lagging the broader markets in the recent past. However, this group is now showing a strong improvement in its relative momentum versus the broader NIFTY 500 Index.
Ashok Leyland Ltd (ASHOKLEY.IN)
This mid-cap auto stock peaked at 169.45 in early September 2022; After that, it saw a corrective retracement and formed a wide but defined trading range for itself. With the quarterly results in and some earnings reactions in arrears, the stock is expected to post higher levels in the coming days.
After making the high at 169.45, price action over the past quarter has seen the development of a bullish (inverted) Head & Shoulders formation. When the price tries to break out, it also resists the 100-DMA, which acts almost as a proxy cutout for this formation. While this formation was taking shape, the stock also found support at 200-DMA, which currently stands at 144, on multiple occasions.
As the stock attempts a breakout, it has rolled into the leading quadrant. This adds another boost to the stock’s current relative outperformance. The RS line versus the broader NIFTY 500 index is also in a firm uptrend and above the 50-period MA.
There is also strong volume involvement in the movement. As the stock attempts a breakout, volumes are already higher than its average; On-Balance Volume (OBV) has also made a new high, which is bullish. The MACD has shown a positive crossover; it is now bullish and trading above the signal line. The RSI breaks out of a formation by penetrating a falling trendline; this precedes the actual price breakout. It is also showing bullish divergence on the price and marking a new 14-period high.
The stock should continue to outperform not only the auto sector, but also the broader markets and mid-cap universe in relative terms. The stock has the potential to test 160-165 levels in the coming days. Any close below 142 would destroy this technical setup.
And
Milan Vaishnav, CMT, MSTA | Consulting Technical Analyst | www.EquityResearch.asia | www.ChartWizard.ae
Milan Vaishnav, CMT, MSTA is a capital markets professional with nearly two decades of experience. His area of expertise includes consulting in portfolio/fund management and advisory services. Milan is the founder of ChartWizard FZE (UAE) and Gemstone Equity Research & Advisory Services. As a Consulting Technical Research Analyst and with over 15 years’ experience in the Indian capital markets, he has provided clients with world-class India-focused independent technical research. He is currently a daily contributor to ET Markets and The Economic Times of India. He is also the author of one of India’s most accurate Daily/Weekly Market Outlooks – a Daily/Weekly Newsletter currently in its 18th year of publication.
