Tata Motors: Will Zero Debt Target Fuel The Rally Further ?

 Hello All,

Herein I share my views on the daily chart and weekly chart of Tata Motors using different tools and indicators. 

Price Action:

Just by focusing on the last up move in the line chart, resistance and support lines are made, which are highlighting a possible rising wedge. The recent uptick was faster and price action was steeper. The blue support line was well respected, but in the last 2 days, the support line was broken. Price may come to test the red support line. 

Also double top formation seems likely, as price rise halted in the same vicinity of the previous top. It's on a very early stage to call this double top, but looking at RSI formation (which is explained in later part), this formation has higher possibility of happening. 

Price Action: 

Looking at the broader formation, one can see that the trend is clearly negative. Prices have reached 2 years old resistance trendline zone. Pause in the ongoing upmove is likely. 

Fibonacci Retracement:

After declining from the zone of 200, the stock made low near 60s. The reverse retracement of this entire fall is checked. The golden ratio 61.8% is highlighting resistance zone of 148. The stock has taken pause in the same zone, which reaffirms the belief of likely pause. 

RSI:

The stock price inclined and made higher highs but the momentum indicator started fading away near overbought zone, made lower tops and confirmed bearish divergence, which is suggesting caution in the ongoing rally. 

MACD:

A lagging indicator MACD is also confirming a crossover signal, which again confirms the likely pause. 

Weekly chart of Tata motors:

Ichimoku:

Multiple interpretations are available on ichimoku indicator, when placed on weekly timeframe. It is clearly seen that the stock has multiple times faced resistance of cloud since 2017. Presently, the stock has halted in the same zone and created shooting star on weekly chart after a bearish candle. 

Tenkan Sen and Kijun Sen crossover is seen but the slope of them is flat, which confirms no major trend change in the recent past. 

Future Kumo cloud remains bearish and Span B is flat. 

Present kumo cloud is also bearish and there is no sign of kumo twist. 

Chikou span is just reached kumo zone, where it has faced resistance multiple times in the past. 

All signs indicate NO trend reversal from bearish to bullish. 

Exponential Moving Average:

As I have shared multiple times in the previous posts also, the best moving average is the one which had offered the best support resistance zones to the prices, here I came across the moving average which suits the best on the counter. i.e. 85 periods' EMA. The price has taken multiple supports and resistance in the last 4 years. The counter made bearish candle formation in the same vicinity of the moving average, which reaffirms likely pause in the ongoing rally. 

Putting it all together:

Rising wedge and possible double top on the daily chart near 61.8% retracement zone, along with RSI divergence and MACD Crossover and most of the parameters of Ichimoku on weekly charts along with 85 period EMA confirms likely pause in the ongoing rally. 

Remember, I am using the term "Likely pause" as intermediate trend reversal confirmation remains pending and I can't deny the continuation of rally. But looking at the discussed parameters, the risk-reward seems THE BEST to initiate bearish trade. 

Cheers,

Kunal

Statutory Disclosure:

Kindly note that this update is only for educational purpose. It is safe to assume that my personal position, my fund's position, and my client's, as well as relative's position, maybe open in the counter. Kindly prefer to take the advice of your financial advisor before initiating any position. Prefer to keep the risk-reward ratio in mind based on personal temperament, risk appetite, and financial background.