Technical Analysis

Tech query: Eicher Motors on intermediate-term uptrend

Yoganand D | Updated on February 13, 2021

I hold Eicher Motors shares at ₹3,000.

Shall I hold or average it?

Praveen Chandupatla

Eicher Motors (₹2,779.2): The stock split in Eicher Motors in August 2020 had opened doors for more retail investors to participate in the stock. In early November 2020, it jumped 17 per cent, conclusively breaking above a crucial long-term resistance at ₹2,250 (stock split adjusted) and continued to trend upwards. Thereafter, the stock surpassed another crucial barrier at 2,600 in early January this year. But, it then encountered a key hurdle at ₹3,000 in late January and started to move sideways with a negative bias.

Again, last week, the key resistance at ₹3,000 limited upside and the stock has slumped 5.4 per cent with above average volume. The stock now tests a crucial base at ₹2,750 with a negative bias. A strong decline below this support can pull the stock lower to ₹2,600 initially. A further plunge below the key support level of ₹2,600 can drag the stock down to ₹2,440. The long-term downtrend that began from the September 2017 high of ₹3,348 came to an end in the March 2020 when the stock recorded a 52-week low of ₹1,246. Subsequently, the stock reversed direction and has been on an intermediate-term uptrend since then.

As long as the stock trades above the significant long-term base level of ₹2,000, this uptrend will remain intact.

Investors with a long-term horizon can stay invested with a stop-loss at ₹1,950. You can consider averaging the stock on declines with the long term stop-loss. A strong rally above ₹3000 can push the stock northwards to ₹3,200 and then to ₹3,300. A further breach of ₹3,300 can pave way for an up-move to ₹3,500 in the long run.

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Published on February 13, 2021
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