A bullish flag is usually formed in stocks with strong uptrends and is considered a continuation pattern. The neckline of the pattern was placed around Rs 1250 levels.
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Cummins India, part of the capital goods sector, gave a bounce back after hitting a low of Rs 1125 on 30 September 2022 to hit a fresh 52-week high in October – thus opening gates for the stock to run to new record highs in the next 1-2 months.
Short-term traders can look to buy the stock now or on dips for a possible target closer to Rs 1500 levels, suggest experts.
The short-term bounce helped the stock to break above a bullish Flag pattern on the weekly charts last week which suggests that the momentum is likely to remain intact.
A bullish flag is usually formed in stocks with strong uptrends and is considered a continuation pattern. The neckline of the pattern was placed around Rs 1250 levels.
The stock rose nearly 7% in a week and nearly 10% in a month. In a six-month time, the diesel engine maker rose by more than 25%.
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On the price front, the stock price is trading well above the short- and long-term moving averages of 5,10,30,50,100 and 200-DMA which is a positive sign for the bulls, data from Trendlyne showed.
The Relative Strength Index (RSI) RSI is at 68.4. RSI below 30 is considered oversold and above 70 is considered overbought. MACD is above its center and signal Line, this is a bullish indicator.
“The correction in Cummins India post March 2021 was gracious, as the stock maintained its uptrend and did not get into Lower High, Lower Low formation against what the benchmark Nifty has done,” Omkar Patil, Technical Research Associate at GEPL Capital, said.
The volumes kept rising on every upswing, while the opposite happened on every swing low. This shows that the demand for the stock is greater than the supply.
“Last week, the stock witnessed a breakout from the Bullish Flag pattern, indicating continuation of the prior uptrend. The 21-weeks EMA have acted as a brilliant variable support to the stock from which the prices have taken support before the breakout,” he said.
The RSI on the weekly timeframe has never slipped below the 50-mark while being in consolidation since august before the breakout. This shows that the stock has strong momentum in it.
“Going ahead, we expect the prices to go higher till the Level of Rs 1460 followed by Rs 1580 where the stop loss must be Rs 1170 strictly on a closing basis,” recommends Patil.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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