By Kiran Jani
The Auto sector, which has endured a six-month downtrend, is now exhibiting signs of recovery. With broader market sentiment improving and price levels beginning to stabilize, certain stocks within the sector are signaling the possibility of a turnaround.
The Nifty Auto Index experienced a robust return of 52% from January 2024 to September 2024. However, following a record high (ATH) of 27,700, the sector faced significant selling pressure, leading to a sharp correction of approximately 27% over the subsequent six months. This recent downward trend reached a low of 20,200.
Nevertheless, the index has since bounced back, staging a strong recovery by rising 1,900 points (from 20,200 to 22,090), marking an impressive rebound of around 9.5%. This rally suggests that the market may be stabilizing after a prolonged period of weakness, with the potential for a reversal in trend.
Hero MotorCorp: A Bullish Reversal after a 44% decline
Hero MotorCorp has endured a sharp 44% decline from its peak in September 2024, with its price falling from ₹6,246 to ₹3,460. However, recent price action suggests a potential trend reversal, with the stock rebounding strongly from these lower levels. This could signal renewed investor interest and the beginning of a bullish phase.
Key Technical Indicators Supporting Hero MotorCorp’s Reversal:
- Breakout from Falling Trendline: The stock has recently broken above a long-term descending trendline, which is a classic signal of bullish sentiment and trend reversal.
- Double Bottom Pattern Breakout: The price is currently trading above the breakout level of a double bottom formation, suggesting a potential shift towards an uptrend.
- Volume Surge Confirming the Breakout: The concurrent increase in both price and trading volume validates the breakout, indicating strong market participation and confirming the upward momentum.
- Strengthening RSI Momentum: The 14-period Relative Strength Index (RSI) has crossed above the neutral 50 mark, indicating bullish divergence and suggesting further upside potential.
Outlook for Hero MotorCorp:
Hero MotorCorp delivered a solid 60% return from January 2024 to September 2024, but has since entered a corrective phase, dropping from ₹6,246 to ₹3,461. Currently, early signs of recovery are evident. The stock has broken above a major descending trendline and is trading above the key breakout level of the double bottom pattern. Coupled with rising volumes, these technical factors suggest that Hero MotorCorp may be positioned for an upward move.
TVS Motor: Bullish Reversal in play
TVS Motor saw a 26% decline from September 2024 to January 2025. However, the stock is beginning to show signs of a potential reversal, with bullish signals emerging on the daily chart since January 2025. These technical indicators point to a possible trend shift, suggesting a recovery phase may be underway.
Key technical indicators supporting TVS Motor’s reversal:
- Cup and Handle Breakout: TVS Motor has broken out from the classic cup and handle bullish reversal pattern, reinforcing the potential for a trend reversal.
- 100-Day Simple Moving Average (SMA) Crossover: The stock price has recently crossed above its 100-day SMA, marking the first crossover since October 2024. This indicates a shift towards a potential uptrend.
- Volume Surge Confirming the Breakout: The simultaneous rise in price and volume suggests strong participation and validates the bullish momentum.
- Strengthening RSI Momentum: The 14-period RSI has moved above the 60 level, indicating bullish divergence and pointing to further upside potential.
Outlook for TVS Motor:
TVS Motor generated an impressive 57% return from April 2024 to September 2024. However, the stock has since faced significant pressure, dropping from ₹2,958 to ₹2,171. Despite the recent correction, technical indicators are now showing early signs of a trend reversal. The breakout above a key bullish reversal pattern, combined with rising volumes and a strengthening RSI, suggests that TVS Motor could be poised for a potential upside move.
Final take
Both Hero MotorCorp and TVS Motor are showing compelling technical signs of a potential reversal in the two-wheeler space. These stocks are displaying bullish chart patterns, strengthening RSI readings, and key breakouts that suggest increasing momentum. While market volatility remains a consideration, these stocks may present attractive upside opportunities for traders and investors.
Continued monitoring of key resistance levels and confirmation signals will be critical, as the next move could be just around the corner.
Disclaimer
Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
As per SEBI guidelines, the writer and his dependents may or may not hold the stocks/commodities/cryptos/any other assets discussed here. However, clients of Jainam Broking Limited may or may not own these securities.
Kiran Jani has over 15 years of experience as a trader and technical analyst in India’s financial markets. He is a well-known face on the business channels as Market Experts and has worked with Asit C Mehta, Kotak Commodities, and Axis Securities. Presently, he is Head of the Technical and Derivative Research Desk at Jainam Broking Limited.
Disclosure: The writer and his dependents do not hold the stocks discussed here. However, clients of Jainam Broking Limited may or may not own these securities.
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