Technical Stock Pick: This auto component stock nearly doubles from 52-week low; reclaims 200-weekly EMA

Technical Stock Pick: This auto component stock nearly doubles from 52-week low; reclaims 200-weekly EMA

Samvardhana Motherson Ltd, part of the auto component space, has almost doubled from its 52-week low recorded in March 2023 which helped the stock to reclaim its 200-weekly EMA on the weekly charts.

Short-term traders can look to buy the stock now for a target of Rs 132 in the next 3-4 weeks, suggest experts.

The stock hit a 52-week low of Rs 61.84 on 28th March 2023. It closed at Rs 115 on the 25th of January 2024 which translates into an upside of 88%.

The auto component stock has risen more than 20% in a month which helped the stock to not only reclaim 200-weekly EMA on the weekly charts and hit a fresh 52-week high of Rs 116 on 29th January 2024.

The stock did witness a recovery after hitting a 52-week low in March 2023, but the momentum fizzled out in June and July 2023 when it approached levels around 100.

The stock found support above 80 levels which acted as a crucial resistance February 2022-June 2023.

The momentum also helped the stock to reclaim crucial moving averages which is crucial for the bulls. The stock is trading above 5,10,30,50,100 and 200-DMA on the daily charts.

The daily Relative Strength Index (RSI) is at 70.6. RSI above 70 is considered overbought. This implies that stock may show pullback. The daily MACD is above its center and signal Line, this is a bullish indicator.

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“Samvardhana Motherson is currently experiencing a surge in its stock price, reaching a 52-week high and showing an impressive 80% increase from its low in March 2023,” Vidnyan S. Sawant, Head Research at GEPL Capital, said.

This strong momentum is evident in the rapid retracement observed on the weekly scale, with a 12-week decline from 103.40 to 86.80 being retraced in just 6 weeks.

“This quick recovery indicates a robust price structure development and a sustained upward trajectory. A key factor contributing to the positive momentum is the significant role played by the 200-weekly Exponential Moving Average (EMA),” he said.

This moving average has transitioned from acting as a resistance to now serving as a crucial support for the stock. This change in polarity reinforces the bullish sentiment and contributes to the stock’s overall positive outlook.

Furthermore, the Average Directional Index (ADX) on the weekly scale is above 20, signaling the establishment of a strong trend. This structural development in the “ADX enhances the overall positive outlook for Motherson, suggesting a sustained and robust upward trend in the stock’s performance,” highlights Sawant.

“Looking ahead, we anticipate further upward movement in prices, targeting the 132 level. It is recommended to set a stop-loss at 104 based on closing values,” he recommended.

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(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)

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