Tata Motors stock has seen fascinating journey in 2016 and it looks like more stuff yet to unfold.
Here's Tata Motors stock daily chart
Formation of Double Bottom and Resistance of 427 Levels
Tata Motors stock had a terrible 2015 in which year it tanked from 600 to 280 by September end. It then bounced pretty hard to 427 levels by 27 Nov 2015. It was an impressive rally of 50% in 2 months BUT then stock succumbed to the market correction and tanked to 280 again by Feb 2016. Tata Motors stock bottomed with the market in Feb 2016. The stock then rallied again 50% in following 1.5 months back to the same resistance. The stock did two things - first formed a solid bottom at 280 and second - created a resistance at 427 levels
Gap Breakout above 427
Tata Motors stock then delivered a gap breakout above 427 in May 2016. It then quickly filled the Gap on Brexit day in June 2016 only this time to rally hard to near 600. This was another 40% rally.
Ordinary Pullback which now has become full blown correction
Tata Motors stock after such a huge rally from 427 to 600 - pulled back and it appeared shallow and ordinary. But with chaos in Tata Group and demonetization - the pullback became a panic correction and stock tanked more. The stock is now back to 427 levels from where the Gap breakout started. In an ideal world - the level of 427 should act as SOLID SOLID support
THE BIG QUESTION: Will dip buyers come and buy the stock near 427 levels with hope that eventually stock will again head back to 600 levels.
It all depends where Nifty decides to bottom. If Nifty bottoms here, then yes Tata Motors at 427-440 zone can be a great pick but if Nifty goes in for a deeper correction - then it would be difficult for the stock to hold on its own. This is one big problem traders face when the market is in midst of correction mode - Can the stock survive and sustain support with overall market still not stable? The same issue is now with Tata Motors stock
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers