Maruti has continued to show strong outperformance with overlapping fall & impulsive rise!

Stock specific movement has continued in Indian markets with auto major like Maruti showing strong impulsive move on upside and overlapping corrections intermittently retracing these upside moves.

Understanding the pattern of correction can help us the gauge the size and magnitude of next leg on upside. Below is the hourly chart of Maruti picked up from “The Financial Waves short term update” published in morning of 21^st October 2014.

Maruti hourly chart: as shown on 21^st October 2014

Maruti hourly chart: as of today by 11:45 am

The below article is part of the research published on 21^st October 2014

Wave Analysis:

Maruti is one of the outperformers from the index. In the above daily chart we can see that prices have hardly retraced the prior down move when Nifty has showed move from the level of 8160 to 7730 levels. The correction in the stock of Maruti is more of time correction which has arrived at the crucial levels. Currently prices are intact in upward moving blue channel. Medium term investors can trail stop towards 2800 levels which will confirm break of 50 days Exponential moving average, pivot low and important channel.

As shown in 60 mins chart, in the last trading session prices have given breakout of the pennant formation with gap up action which is positive sign. Now, an hourly close above 3020 will confirm that upside trend has started. On downside 2900 will act as an important support where channel is placed.

In short, close above 3020 will confirm start of upside trend and then move towards 3120 is possible.

Maruti showed strong performance today itself and stock has surpassed above 3120 levels. So is it right time to enter the stock now? Probably not because the risk reward is not fitting well and the indicators are in overbought state. Nevertheless, existing long positions can use trailing stop method to ride the trend…

“The Financial Waves short term update”is a daily research report which is published before equity market opens. It has short to medium term view on Nifty and three different stocks on daily basis with Applied technical analysis, Elliott wave counts, crucial levels to watch. The report is delivered directly to your mailbox and is useful for traders, investors, and students of markets who want to learn practical application of systematic market analysis! For subscription option please visit http://www.wavesstrategy.com/index.php/store.html