ICICIdirect.com report on Amara Raja:
Amara Raja Batteries is one of the leading lead acid battery manufacturers with applications in automotive and other industries like telecom, power, oil, railways and defence.
Breakout from falling channel marks end of corrective phase and start of fresh up leg
The share price of Amara Raja Batteries has been in a well established long term up trend consistently forming higher peaks and troughs on the long term price charts.
After hitting its all-time high of Rs 328 during late January 2013, the stock entered a corrective phase mainly driven by profit booking at all-time highs and corrected towards Rs 238 by mid-April 2013. The entire corrective decline has occurred in a well defined falling channel as highlighted in the adjoining weekly candlestick chart.
The key technical observation on the price charts is that the decline from all-time highs saw the stock in its last major up-leg from August 2012 to January 2013 (142-328) by precisely 50 percent. The April 2013 low of Rs 238 also rests upon the long term rising trend line in place since February 2012. The bounce back from April lows has seen the stock register a volume led breakout past the falling channel in place since January 2013.
The breach of the falling channel marks the end of a four-month corrective phase and start of a fresh upward leg, which is expected to lead the stock to fresh all-time highs in the medium term.
Volume expansion in direction of primary trend
A look at the volume behaviour further re-affirms the bullish bias in the stock as price rallies are accompanied by strong volume participation whereas sideways/corrective price actions are on the back of thin volumes. In Dowtheory parlance, volume expansion in the direction of primary trend is the sign of a healthy bull market. Among oscillators, the weekly RSI has generated a positive crossover above its nine period average, which indicates strength in the current breakout.
Strategy: Buy Amara Raja Batteries in the range of Rs 279-270 for a target price of Rs 335 with a stop loss below Rs 251 on a closing basis.
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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