Technical Analysis

Motherson Sumi Systems (₹106.8): Buy

Yoganand D | Updated on August 11, 2019 Published on August 11, 2019

 

The stock of Motherson Sumi Systems gained 8.6 accompanied by above-average volume on Friday, showing signs of trend reversal.

Investors with a medium-term horizon and contrarian view can buy the stock at current levels. Although the stock is in a downtrend across all time-frames — long, medium and short term — it shows of trend reversal and gained on Friday.

After testing a key psychological support at ₹100 last week, the stock recorded a 52-week low at ₹91.2 and bounced up on August 8. Moreover, it has formed a hammer candlestick pattern in the daily chart, which is a bullish reversal pattern.

Also, both the daily and the weekly price rate of change indicators are showing positive divergence indicating that the trend reversal is on the cards.

 

There has been an increase in daily volume over the past week. The daily RSI has entered the neutral region from the bearish zone, which also displays positive divergence, backing the trend reversal. Taking a contrarian perspective, the medium-term outlook appears bullish for Motherson Sumi Systems.

The stock can continue to trend upwards and reach the price targets of ₹115 and ₹124 in the medium term, with a minor halt at around ₹115. Traders with a medium-term view can buy the stock with a stop-loss at ₹98.5.

Published on August 11, 2019

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