Technical Tip: Buy Bajaj Auto placing strict stop-loss at 2495
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Looking at the weekly chart, Bajaj Auto has confirmed its breakout from Ascending Triangle pattern during early June, 2016. This led to acceleration in momentum and stock rallied higher by forming a higher top higher bottom formation. In that optimism, stock registered an all-time high of 3120 (September 09, 2016) and reversed sharply. However, the fall got arrested near 2510 and we saw decent pullback towards 2790. Looking at the weekly chart, the level of 2510 coincided with the weekly 89-EMA and along with that the 61.8% Fibonacci retracement joining from 2121 to 3120 precisely comes near the same. Looking at the weekly line chart, we are seeing a Top Bottom Support which is a bullish trade set up. The weekly RSI (14) momentum indicator has formed Positive Reversal pattern (please find the exhibit) which is a bullish pattern. On a daily chart, stock has formed a triangle pattern and today it confirmed its breakout from the said pattern. Also, today’s price action has confirmed the Higher Top Higher Bottom formation on daily chart. On a monthly chart, last month candle resembles Inside the day candle. Considering the above technical parameters along with the RSI (14) momentum indicator, we advised traders to buy this stock at current level of 2790 with an upside target of 3425. Strict stop loss should be placed at 2495 as any break below this level will pull the stock inside the Ascending Triangle pattern and diminish the bullish view.
Weekly Candlestick Chart
- Buy Bajaj Auto at 2790, Target 3425 & SL 2495.
- Return to risk ratio: 1:2.15.
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