Maruti Suzuki bounces from a key base

A break above ₹6,500 will alter the short-term downtrend and take the stock up to ₹7,500

Here are answers to readers’ queries on the performance of their stock holdings.

I bought Maruti at around ₹8,000-8,500 levels. What is your opinion on this stock from a long-term perspective?

Jeevan

Maruti Suzuki India (₹6,101.2): The stock of Maruti Suzuki India has been in an intermediate-term downtrend since encountering a key resistance in the band between ₹9,700 and ₹10,000 in July 2018.

While trending down, the stock had decisively breached key supports at ₹8,500 and ₹6,500 in early July this year and continued to trend down. But a significant long-term support and a 50 per cent Fibonacci retracement level of the prior uptrend at ₹5,500 cushioned the stock.

Subsequently, the stock took support from the level and bounced up gaining 7 per cent accompanied by good volume last week.

Moreover, it formed a bullish engulfing candlestick pattern in the weekly chart, implying short-term trend reversal.

Also, the daily relative strength index and price rate of change indicator are displaying positive divergence, backing the trend reversal. There has been an increase in weekly volume over the past three weeks.

The on-going near-term rally can encounter resistance ahead at ₹6,500.

An emphatic break above this barrier will alter the short-term downtrend and take the stock up to ₹7,000 and ₹7,500 over the medium term. Inability to move beyond ₹7,500 can keep the stock consolidating sideways in a wide range between ₹5,500 and ₹7,500.

Key resistances above ₹7,500 are at ₹8,000 and ₹8,500. But a strong decline below the immediate support level of ₹5,500 will strengthen the downtrend and drag the stock down to ₹5,000 and ₹4,500 in the medium term. Such a fall will also be a threat to the long-term uptrend that has been in place since 2012.

Next key supports below ₹4,500 are placed at ₹4,000 and ₹3,400 levels. You can consider averaging in declines with a stop-loss at ₹5,400 levels and consider booking partial profit at ₹7,500 levels.

What are the short- and long-term prospects for the shares of Strides Pharma Science purchased at ₹486?

S Vanaja

Strides Pharma Science (₹422.1): The stock has been in a sideways consolidation phase in a wide range between ₹335 and ₹510 since May 2018.

 

The long-term trend is down for the stock. After testing the lower boundary of the sideways range in late July, the stock began to trend up. A strong tumble below ₹335 can drag the stock down to ₹300 and ₹260 over the medium to long term.

An emphatic break above the key short-term resistance level ahead at ₹450 can extend the current rally to ₹480 or ₹510 in the short to medium term. You can consider averaging the stock with a stop-loss at ₹335. A conclusive break above ₹510 will pave way for an up-move to ₹600 and ₹650 over the medium term.

Send your queries to [email protected]

Published on August 11, 2019

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