Technical Analysis

Dissector: BSE Auto Index testing important hurdle

Yoganand D | Updated on March 08, 2018 Published on March 24, 2012

The BSE Auto Index comprises 10 scrips. Tata Motors has the most weight in the index with 28.6 per cent and Mahindra and Mahindra follows with 19 per cent. Bajaj Auto, Hero Motocorp and Maruti Suzuki India share 14.8 per cent, 12 per cent and 11.3 per cent respectively.

The BSE Auto Index has been on a long-term term uptrend since bottoming out in December 2008 at a low of 2127. In September 2009, the index conclusively broke through its long-term resistance at around 5,880 and accelerated higher until it registered a new high in November 2010 at 10,536 levels.



The BSE Auto Index comprises 10 scrips. Tata Motors has the most weight in the index at 28.6 per cent and Mahindra and Mahindra follows with 19 per cent.



Bajaj Auto, Hero Motocorp and Maruti Suzuki India share 14.8 per cent, 12 per cent and 11.3 per cent respectively. Exide Industries, Cummins India, Bharat Forge, Ashok Leyland and Apollo Tyres are the other stocks in the index with weights between 1 and 4 per cent.



Long-term view



After registering its new high in late 2010, the index started to consolidate sideways in a broad range between 8,000 and 10,500 levels. The lower boundary at 8,000 levels provided support for the index to rebound higher during August 2011 and December 2011. Following a rally from the lower boundary, the index is presently testing significant long-term resistance in the zone between 10,330 and 10,530.



This sideways movement between 8,000 and 10,500 levels is positive for the index from a long-term perspective. The index is hovering well above its 21 and 50-week moving averages.



Conclusive breakthrough of the aforementioned resistance zone will lift the index to new highs - to 12,000 in the long-term. Significant long-term supports for the index, pegged at 9,000, 8,000, and 7,400 levels, will provide base if the index witnesses selling pressure.



As long as 6,500 levels hold the long-term trend remains up for the index.



Medium-term view



Since the December 2011 trough of 7,894 (52-week low), taking support at around 8,000 levels, the index has been on a medium-term uptrend.



However, marking a 52-week high at 10,487 on February 17 this year, the index began to lose its bullish momentum by consolidating sideways between 9,700 and 10,487. The index is hovering well above its 50 and 200-day moving averages.



As long as the index is jailed in the 9,700 and 10,487 range, its short-term trend will be sideways.



Only a breakthrough in either direction will script a clear medium-term trend.



A fall below 9,700 will pull the index down to 9,200 with a minor pause at around 9,500 levels.



A further break of 9,200 levels will mar the medium-term uptrend and drag the index down to 8,900 and then to 8,500 in the medium-term.



On the other hand, upward reversal from 9,700 can take the index to its upper boundary at 10,487.



An emphatic rally above the upper boundary will pave the way for a rally to 11,000 in the same time frame.



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