Investors with medium-term perspective can consider buying the stock of Atul Auto (Rs 155.5), a manufacturer of three-wheeled commercial vehicles. Ever since bottoming out in early 2009 at the low of Rs 16, the stock has been on a long-term uptrend. In 2010, the stock zoomed higher sharply but encountered key resistance at around Rs 130 in November 2010. Thereafter, this level started to provide resistance for the stock. After multiple attempts to break through this resistance, the stock finally shot up last week by skyrocketing 16 per cent last week. The volume accompanying this break through was good. The intermediate-term trend has been up for the stock from August 2011 trough of Rs 76 and is in tact. Short-term trend is also up for the stock. It is hovering well above its 50 and 200-day moving averages. The daily relative strength index has re-entered in to the bullish zone from the neutral region. The weekly as well as monthly RSI are featuring in the bullish zone. Both the daily and weekly moving average convergence divergence indicator are rising higher in line with the stock price and are hovering in the positive territory implying upward momentum. Likewise, the daily and weekly price rate of change indicators are floating in the positive area signifying buying interest.
We are bullish on the stock from a medium-term perspective. We believe that Atul Auto has the potential of trending higher and touching our medium-term price target of Rs 180, with minor pause or sideways movement around Rs 170. Investors with medium-term perspective can consider buying the stock with deeper stop-loss at Rs 135.
Follow up - KPIT Cummins Infosystems (Rs 111.7)
The stock rallied in line with our expectation and achieved our price target of Rs 120. It has marked a new 52-high at Rs 121 on May 8.
(This recommendation is based on technical analysis. There is a risk of loss in trading.)