Short to medium-term traders can look to buy the stock now or on dips as the stock is trading near the overbought zone.
The commercial vehicle stock rose more than 10% in a month and over 20% in the last 3 months which pushed the stock to a record high of Rs 191 on 11th August 2023.
The momentum also helped the stock to break out from a 4-year long cup and handle formation on the weekly charts in July 2023 which suggests that bulls are here to stay.
‘Cup & Handle’ pattern is easy to identify. There are two parts of this pattern wherein one part is a U-shape cup and another one is a small handle.
The handle gets formed when the pullback usually traces at least one-third of the cup. The neckline of the handle was placed above Rs 170.
The daily Relative Strength Index (RSI) is placed at 69.4. RSI below 30 is oversold and above 70 is considered overbought, Trendlyne data showed.
In terms of price action, the stock is trading well above most of the crucial short- and long-term moving averages such as 5,10,20,30,50,100 and 200-DMA on the daily charts.
“Ashok Leyland stock prices have given a breakout with rising volumes from the 4-year-long cup and handle pattern. The ticker is in strong uptrend with the formation of higher highs and higher lows on the short term as well as long term charts,” Aditya Thukral, Senior Analyst at Master Capital Services, said.
“This breakout has happened a couple of weeks before and since then, the stock has been sustaining above it strongly. Now, a fresh all-time high breakout is witnessed in the stock along with a spike in volumes which suggests another round of rally in the prices,” he said.
“This uptrend is expected to continue in the stock prices where longs should have stop losses below Rs 171 on a weekly closing basis which is the higher low of the ongoing rally,” highlights Thukral.
“On the upside, longs in Ashok Leyland can expect target levels of Rs 219 in the next 3-4 months. The target price level is the 138.2% extension of the cup and handle pattern,” he recommends.
Prices are well placed above all the major exponential moving averages viz. 50-day, 100-day, and 200-day. Previous resistances continued to provide support to the stock prices at every juncture, following the principle of polarity.
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