Medium-term investors can consider buying the stock of automotive components manufacturer Lumax Auto Technologies (Rs 158.1). The company's products include drive transmission and steering components, body and chassis, and electrical components. After bottoming out in March 2009 around Rs 15, the stock has been on a long-term uptrend. In early February 2011, the stock took support at Rs 130, following a corrective decline from its November 2010 peak of Rs 222. After taking support once more in the band between Rs 120 and Rs 130 in March, the stock changed its direction. Since then it has been on a short-term uptrend. In early April, the stock breached its down trend-line and is currently hovering well above its 21 and 50-day moving averages. On April 21, the stock broke-out of an intermediate-term resistance at Rs 150 by jumping 5 per cent. The daily relative strength index has emphatically entered in to the bullish zone and weekly RSI is inching higher in the neutral region towards the bullish zone. Daily moving average convergence divergence indicator is rising higher in line with the stock price and is featuring in the positive territory signalling upward momentum. The 14-day price rate of change indicator is featuring in the positive area indicating buying interest and weekly indicator is on the brink of entering the positive area.

Our medium-term forecast on the stock is bullish. We believe Lumax Auto Technologies has the potential to trend higher and reach our price target of Rs 185 in the medium-term, however, we don't rule out a minor pause around Rs 173. Investors with medium-term horizon can consider buying the stock with stop-loss at Rs 144.

Follow up – Federal Bank (Rs 441.4)

The stock slipped marginally (Rs 3.9) from our recommended price level last week. We re-state our medium-term bullish outlook on the stock.

(This recommendation is based on technical analysis. There is a risk of loss in trading.)

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