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We recommend a buy in Cummins India from a short-term trading horizon. It is evident from the charts of Cummins that it was on an intermediate-term downtrend from its September peak of Rs 330. It found support at Rs 185 on December 11, which is also a 52-week low. Within this downtrend, we notice a formation of falling wedge pattern between late October and late December.

The stock formed a significant trough by consolidating in the range of Rs 190 and Rs 200 recently. On December 29, the stock conclusively broke out of both the falling wedge pattern and intermediate-term down trendline by surging 7 per cent. A minor positive divergence in the daily relative strength index also supports the stock’s trend reversal.

The daily RSI is likely to enter the bullish zone and the weekly RSI is on the verge of entering the neutral region from the bearish zone. Our short-term forecast for the stock is bullish. We expect its current up move to prolong until it hits our price target of Rs 235 in the forthcoming trading sessions. Traders with short-term perspective can buy the stock while maintaining a stop-loss at Rs 199.

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