Eicher Motors has been a dream stock and has had a wonderful run-up in the recent months. Why am doing this post is to highlight few niggling concerns in the daily price chart. There is a clear slowdown in the upside momentum in the recent days. Have a look at the daily chart featured below.
Notice how the price fell sharply on July 3, completing a “bearish engulfing” candlestick pattern in the process. Though the stock managed to recover ground since July 3, it is glaring that the price has really struggled on its way up. Why and how do I say that? The fact that the stock took 12 trading sessions to recover the fall recorded on July 3 is glaring enough I guess.
My assessment based on this price action is that pro-money has been distributing or taking profits on the way up since July 3.
To my eye, the move up since July 3 is no different from the pattern in the 15-minute Nifty futures chart referred to in an earlier post. Those who believe in indicators would have noticed the negative divergence between the 14-day RSI and the price action.
After reading all this, am sure you would have realised that I have a bearish view on the stock. But, this view means nothing and price does not give a damn to my view. Though there are early warning signs, unless we see a fall below 19,900, there is really no case for turning bearish on the stock.
The purpose of this post is to issue an alert, just in case my bearish bias is validated by price action. I have posted this today as the company reported its quarterly earnings last evening and am no Fundamental expert to comment on the performance.
If you own shares in Eicher Motors, then by all means enjoy the run. But do not get carried away and have protective stops in place, IF price were to take a u-turn.
Note: I do not own shares in Eicher Motors. The purpose of this post is NOT to give a recommendation on Eicher Motors but to direct attention to the nuggets & clues that price leaves behind.
Thanks a lot for these posts sir. Helps a lot in understanding price movements.
Hardik Shah says
KK Sir, One post daily or alternative days will help lot to learn.
Do Q&A also if possible by posting a chart
Thanks a lot