By Kiran Jani
The Auto sector, which has endured a six-month downtrend, is now exhibiting signs of recovery. With broader market sentiment improving and price levels beginning to stabilize, certain stocks within the sector are signaling the possibility of a turnaround.
The Nifty Auto Index experienced a robust return of 52% from January 2024 to September 2024. However, following a record high (ATH) of 27,700, the sector faced significant selling pressure, leading to a sharp correction of approximately 27% over the subsequent six months. This recent downward trend reached a low of 20,200.
Nevertheless, the index has since bounced back, staging a strong recovery by rising 1,900 points (from 20,200 to 22,090), marking an impressive rebound of around 9.5%. This rally suggests that the market may be stabilizing after a prolonged period of weakness, with the potential for a reversal in trend.
2 Automobile stocks trading at Low P/E after market correction – Add to Watchlist? Hero MotorCorp: A Bullish Reversal after a 44% decline
Hero MotorCorp has endured a sharp 44% decline from its peak in September 2024, with its price falling from ₹6,246 to ₹3,460. However, recent price action suggests a potential trend reversal, with the stock rebounding strongly from these lower levels. This could signal renewed investor interest and the beginning of a bullish phase.
Key Technical Indicators Supporting Hero MotorCorp’s Reversal:
- Breakout from Falling Trendline: The stock has recently broken above a long-term descending trendline, which is a classic signal of bullish sentiment and trend reversal.
- Double Bottom Pattern Breakout: The price is currently trading above the breakout level of a double bottom formation, suggesting a potential shift towards an uptrend.
- Volume Surge Confirming the Breakout: The concurrent increase in both price and trading volume validates the breakout, indicating strong market participation and confirming the upward momentum.
- Strengthening RSI Momentum: The 14-period Relative Strength Index (RSI) has crossed above the neutral 50 mark, indicating bullish divergence and suggesting further upside potential.
Source: Investing.com
Outlook for Hero MotorCorp:
Hero MotorCorp delivered a solid 60% return from January 2024 to September 2024, but has since entered a corrective phase, dropping from ₹6,246 to ₹3,461. Currently, early signs of recovery are evident. The stock has broken above a major descending trendline and is trading above the key breakout level of the double bottom pattern.
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