[Premium] Nifty Auto Stocks To Buy
First up is MRF Ltd. which represents only 3.5% of the Nifty Auto index, but has been trending beautifully since late 2016. It broke out again in March and retested the breakout area last week, so we want to be buying this weakness as long as prices are above 72,840 and taking profits near 99,250.
Exide Industries Ltd. is one of the smallest index components, however, it's breaking out of a 10-month base which suggests we want to be long above 249.75 and taking profits near 285.
Ashok Leyland represents 4% of the index and has been in an uptrend since 2014. The stock is currently retesting our previous price target and 2017 highs of 135.50, so we want to be long above that level and taking profits near our next price target of 212.20.
Apollo Tyres is is another small component of index that broke out in mid-2017 and has been trending higher since. Price action is a bit choppy, but as long as we're above 249 the bias remains to the upside. With that being said, for risk management purposes we want to be long above the late 2017 and early 2018 highs near 290 and taking profits at 324.50.
Last on our list is a large-cap name representing 13.5% of the Auto index, but its chart is too nice to ignore. Mahindra & Mahindra broke out of its 3-year base late last year and has been trending higher since. Last week prices retested support at 822.50 and are quickly back at new all-time highs. As long as prices are above 822.50, we want to be long and taking profits near 993.50.
The Bottom Line: Using equal-weight indexes in our analysis allows us to identify potential profit opportunities that may not be obvious to those looking solely at the cap-weighted indexes. Due to the recent out-performance of the equal-weight Nifty Auto index we want to be looking at the long side of the names listed above where the risk is well-defined and the reward/risk is skewed in our favor. Whether you trade these setups or not, a good takeaway from this is that even rangebound sectors can offer opportunities on both the long and short side if you're willing to take the time to analyze each individual component.
Lastly, if breadth studies like this one are new to you and you’re interested in learning more about them, be on the lookout for some training content we’re working on and should be sharing with you all in the weeks ahead. If you have questions in the meantime, please let us know.
Allstarcharts Team