This auto ancillary stock eyes multi-month trend reversal. Here's a technical analysis
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Despite a weak start, the markets staged a remarkable recovery on Friday to end on a flat note. The Nifty saw a weak opening; it opened lower and drifted further to form the low point of the day in the first hour of the session. However, after that, for the rest of the session, the markets staged a remarkable rebound. It managed to recoup nearly all of its opening losses. The headline Index closed with a negligible loss of 17.40 points (-0.07%).
This stock from the auto ancillary space from the broader markets is confirming a trend reversal. A move from current levels would mark and act as a confirmation of the reversal of the multi-month downtrend in the stock.
ETMarkets.com
SONACOMS or Sona BLW Precision Forgings has been in a multi-month downtrend for over a year. It has lost significant ground from the levels of Rs. 760 in September last year to the lows formed near Rs. 370 in April this year. However, over the past few months, the stock has worked hard to form a base for itself.The recent price action over the past several days shows that the stock is on the verge of confirming a multi-month downtrend reversal. The price action also shows that the stock took support at its 200-DMA over the past few days, and in the process, now trades above all key moving averages.
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The daily MACD is bullish and stays above its signal line. The RSI has formed a fresh 14-period high, which is bullish; it also stays neutral and does not show any divergence against the price. The RS line against the broader Nifty 500 Index has reversed its trend; it is now trending higher and is above its 50-period MA. The stock is presently inside the leading quadrant of the RRG when benchmarked against the broader Nifty 500 Index.
The OBV has shot up sharply and is at a new high, confirming strong participation of volumes in the move. A move higher is likely to take SONACOMS higher to Rs. 520.
A close below Rs. 475 would negate the current technical setup.
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