Auto Sector: Deep Dive

JC Parets
February 8, 2021

Nifty Auto has been on our radar for quite some time now. When Nifty50 was under short term pressure, Nifty Auto was one of the sectors that stood out as a strong performer.

With the ensuing move in the Auto stocks, we thought of doing a deep dive into this sector to see if we could find some actionable setups.

The Auto sector has closed comfortably above the resistance level of 10,400 effectively absorbing overhead supply at these levels. In the weeks and months ahead, this sector could make a dash towards the level of 12,110. The strong bullish momentum regime indicated by RSI alludes to the same view.

Click on chart to enlarge view.

Relatively speaking, Nifty Auto has broken out of its resistance zone and is ready for the next leg of the rally.

Now let’s take a look at some actionable ideas at current levels that look attractive on the long side for the next few weeks and months.

The auto stocks have picked up pace and are ready to roar.

Bajaj auto has been on the move for some time now. The price has broken above its resistance of 4,190 and looks like it's headed towards its next target. Momentum is in a strong bullish regime and we are positive above levels of 4,190 for a target near 5,529.

Hero MotoCorp has been a little late to the party but it's getting there. A sustained move above 3,400 could take it higher towards the next target of 4,091. The stock is moving out of an almost three-year base. The bigger the base, the higher in space!

After a four-year downtrend, Tata Motors has had a dream rally since March 2020 lows! And it doesn't seem like that dream is coming to an end anytime soon. With the breach of 290, the price is gearing up for its next race. We are bullish above 290, with a target near 390.

Up next is Mahindra & Mahindra. The common theme here is that more stocks breaking out of their bases! M&M has had a rather steady up-move and seems to have absorbed the overhead supply at 810, a level that has a lot of price memory. We are bullish above 810, with a target near 985.

TVS Motor has breached its overhead resistance of 583. Notice how prior to 2020, the indicator remained predominantly in the lower half of the indicator pane for two years. With the sharp bounceback since March 2020, the indicator has shifted gears to bullish regime and has been displaying strength ever since.

As long as the price remains above 583, we are bullish with a target near 788.

Escorts has had some difficulty in moving past the level of 1,385 but the stock is making another attempt to surpass this hurdle. While momentum is yet to accelerate, the indicator has remained in the top half of the indicator pane even as the price underwent a minor correction.

We are bullish above 1,385 with a target close to 1,980.

Tyre stocks have been on a tear and look to resume that trend after taking a minor breather. Apollo Tyre has climbed back to levels last seen in August 2018. There is a lot of price memory at 240 which has been at play for three years now. It is important for the price to sustain above 240 in order to get to its target of 308.

Balkrishna Industries was one of the first Auto stocks to have breached its early 2020 highs in July 2020 itself. Since then the price has clocked new all-time highs and managed to hold on to those higher levels. This is more of a 'slow and steady wins the race' kinda stock. It won't rip through the ceiling, but it moves at a consistent pace.

Pullbacks towards 1,680 can be bought. We are bullish above the risk management level of 1,680 with a target near 2,300.

Ashok Leyland is another such stock that has cleared a significant level of resistance. We are bullish above 122, for a target near 167 in the weeks and months ahead.

Last on the roster sheet is Jamna Auto. This stock is yet to break out above its resistance of 72. While we will keep this on our radar, we think a move above 72 could take it much further towards 103.

Nifty Auto is one of the stronger sectors in the market as current sector rotation is in play. These are some of the actionable ideas which we wanted to share in order to help you benefit from the move going forward.

Keep in mind, each person has a unique trading style and varied expectations from their investments in the market. Choose your stock keeping all your parameters in mind. there's plenty of fish in the sea!

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team

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