Running On 'Auto' Mode 2.0

JC Parets
June 28, 2022

Is the market out of the woods yet? No.

Is there a change in trend with the most recent bounce bank in the indices? No.

Are some areas of the market doing better than others? Yes.

Are we here to discuss one such sector today? You bet we are!

We've been pounding the table about the strength that we've been noticing in the Auto space for over a month now. With that trend becoming more and more clear, we have a few more names joining the leaders. The Auto sector is exhibiting strengths that cannot and should not be ignored. Read on to know more!

First up, let's take a look at the index chart and focus on the levels here. 10,400 has acted as a crucial zone of support during the past five months of whipsaw moves in the market. The index continued to hold on to these levels even as other sectors were giving up on their floors without a fight. That was our first sign of relative strength.

The index has since bounced back and is currently trading close to 11,580. The next level to track here is the 2018 high level near 12,130. It will be quite interesting to see how the price reacts around these levels. Remember, the 2018 highs are significant because risk-on metrics across the globe started rolling over around the same time. A move above those highs would be a big signal here.

Click on the chart to zoom in.

Next up, let's add more weight to this analysis, shall we?

Let's bring in the relative strength chart. As can be seen in the chart below, the ratio of Nifty Auto/ Nifty 100 broke out of a three-year base. Big base breakouts in the current market scenario. That's definitely worth our attention, right? The more times a level is tested, the more likely it is to be breached!

Let's start with our roster sheet now.

We shared this idea as the Trade of the week, please find the analysis here.

Bajaj Auto is in the news for the stock buyback announced. We have some levels that we follow to identify where the price is headed. Going by the current price move it seems that 4,000 is a level that the price has found difficult to breach. Renewed interest in the stock (if at all) could push the price higher. In a scenario where the price moves past the resistance of 4,000, the next target to track would be 4,500 (close to the buyback price of 4,600). We are bullish above the risk management level of 4,000 with a target close to 4,500.

Hero MotoCorp is currently trading close to a level that has quite the market memory going back two years! As can be seen in the chart below, 2,800 has been a crucial area of support and resistance in the recent past. The price has also formed an inverse head and shoulders pattern, the target for which coincides with the next resistance near 3,630.

Here's TVS Motors on a weekly chart. 794 is the crucial level here and the price is trading above this level already! As long as the price sustains above this level, the 4-year base breakout is valid. Base breakouts, in this market! The next target to track would be 1,135.

Jamna Auto has been on our radar because of the consistent strength coming through on the relative strength chart. The price is currently trading above the big base breakout level of 103. As long as the price is above this level, the next level to track is 125, post which 155 comes into the picture.

We recently shared Mahindra CIE in our latest conference call. The price seems to be moving in a sideways trading range. Currently bouncing off a support zone of 160, the price could go on higher towards its target of 305.

Tube Investments of India has been hovering around the crucial zone of 1,620. A sustained move above this level could take the price higher towards 1,880. A breakout from thereon would modify the target to 2,468.

Sundaram Clayton is another name that has demanded attention. The price broke out above the resistance of 4,110 led to a five-month base breakout in the price. As long as the price trades above this level, the next target to track would be 4,490. A move above that level could push the price higher towards 5,100.

Which of these names are a part of your portfolio? Are you buying into this Auto rally?

Share your thoughts with us and please let us know if you have any questions.

Allstarcharts Team

Filed Under