Technical Analysis

Tata Motors is under pressure

Yoganand D | Updated on May 12, 2019 Published on May 12, 2019

The stock has been on a long-term downtrend since September 2016

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

What is the outlook for Tata Motors?

Sarvesh Goel

Tata Motors (₹186): Since encountering a key long-term resistance at ₹595 in September 2016, the stock of Tata Motors has been on a long-term downtrend, forming lower troughs and lower peaks. Medium-term trend is also down. After recording a multi-year low at ₹141 in February 2019, the stock reversed direction and was on a short-term uptrend until it met a resistance at ₹235 in mid-April.

The stock again began to decline from this resistance. Last week, it plunged 11 per cent, breaking below a key support at ₹200 and the 200-day moving average. The stock appears to have resumed a medium-term downtrend. It hovers well below the 50- and 200-day moving averages.

The stock can extend the downtrend and test support at ₹170 in the short term. A further decline below this base level can drag the stock down to ₹150 over the medium term.

An emphatic fall below the long-term support band between ₹140 and ₹150 will reinforce the primary downtrend and pull the stock down to ₹120 and then to ₹100 in the long run.

 

On the other hand, a strong rally above the immediate resistance at ₹200 can take the stock higher to ₹235 and ₹250 levels. To alter the medium-term downtrend, the stock needs to decisively break above the vital resistance at ₹300. Such a break can strengthen the bullish momentum and take the stock northwards to ₹350 and then to ₹380 over the long term. Investors with a long-term perspective can consider buying above ₹235.

Can I average the stocks of Prakash Industries and Rain Industries at the current prices?

Pradeep Kabra

Prakash Industries (₹71.2):Since recording a multi-year high at ₹276 in January 2018, the stock has been in a long-term downtrend. Medium- and short-term trends are also down. However, the stock currently tests a key long-term support in the range between ₹63 and ₹67. A fall below the base level can drag the stock down to ₹50. But a strong rise above the immediate resistance at ₹80 can take the stock higher to ₹95 and then to ₹100. A breakthrough of ₹100 can push the stock northwards to ₹120 and ₹140 levels in the long term. Consider averaging above ₹80 with a stop-loss at ₹63.

Rain Industries (₹109.8): The long-term trend is down for the stock. But it found support in the band between ₹90 and ₹95 in February 2019. Since then, the stock has been in a sideways range between ₹90 and ₹150. You can average at the current levels with a stop-loss at ₹85.

A strong break above ₹150 will strengthen the bullish momentum and take the stock higher to ₹200 in the long term. The next key resistances are placed at ₹230 and ₹250 levels. Supports below ₹90 are at ₹80 and ₹70.

 

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Published on May 12, 2019
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