Technical Analysis

Tech query: Motherson Sumi Systems tests a key base

Yoganand D | Updated on March 27, 2021

I have shares of Motherson Sumi Systems at ₹221. Should I hold or exit?

IL Pareek

Motherson Sumi Systems (₹199): The stock of Motherson Sumi Systems has been on a long-term uptrend since registering a 52-week low at ₹48.5 in March 2020. The medium-term trend is also up. But the short-term trend is sideways with a negative bias.

In early February this year, the stock broke through a key long-term resistance at ₹175 and continued to trend upwards. Nevertheless, it encountered a key resistance at around ₹235 in early March and started to decline on the back of selling interest.

Triggered by negative divergence on the daily relative strength index (RSI), the stock started to decline in early March.

Breaching a key support at ₹210, the stock slumped 5.6 per cent in the past week. It now tests the key support at ₹200. A decisive plunge below this base will weaken the medium-term uptrend and drag the stock lower to ₹180 and then to ₹175 levels. A further decline below ₹175 can pull it lower to ₹160 and then to ₹140 levels. The next supports are at ₹120 and ₹100 levels.

Conversely, if the stock breaks above the key barrier in the ₹225-230 band, it can reinforce the uptrend and trend to ₹250 and then to ₹280 levels over the medium term.

You can consider exiting the stock on a strong fall below ₹200 and re-enter at lower levels with a medium-term stop-loss at ₹140. Alternatively, you can stay invested and average on declines with a stop-loss at ₹140.

I bought Bajaj Electricals at ₹1,064. Should I hold or book loss?

Sankari Murugan

Bajaj Electricals (₹950.1): The stock of Bajaj Electricals has been on a long-term uptrend since it took support at ₹260 in March 2020. In early February, it conclusively surpassed a key hurdle at ₹800 and accelerated. But the stock encountered subsequent resistance at ₹1,100 in mid-February.

This barrier limited the upside in early March and the stock started to decline. But a key support at ₹900 cushioned the stock recently.

The stock is broadly range-bound between ₹900 and ₹1,100. A strong plunge below ₹900 can drag it lower to ₹800.

A further decline under this level can see it testing ₹700 over the medium term. An immediate resistance is at ₹1,000, which is also a psychological level to note.

A strong rally above this level can take the stock higher to ₹1,100. However, a conclusive break-out of ₹1,100 is needed to strengthen the uptrend and take the stock higher to ₹1,200 over the medium-term.

That said, if the stock fails to move beyond either ₹1,000 or ₹1,100, it can bring back selling interest and the possibility of plunging below ₹900 is high. In that case, you can exit the stock and re-enter at lower levels with a stop-loss at ₹650. Investors with a long-term view can stay invested with a stop-loss at stop-loss at ₹500 levels.

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Published on March 27, 2021

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