A Powerful Trend Reversal Pattern Is Registered In This Auto Sector Stock; Do You Own It?

Indices witnessed selling pressure from Tuesday’s day high and today also it is trading with volatile moves. Somehow, it recovered more than 80 points sharply from the day’s low. Auto sector stocks also participated in this recovery and one stock from the same sector outperformed its peers by rallying more than 10% and registered a technical breakout.  

The stock Igarashi Motors India Ltd is engaged in the production and export of Permanent Magnet DC Motors for the Automotive Sector, especially for the passenger vehicle sector. It was incorporated as CG Igarashi Motors Limited in 1992 as a JV between Crompton Greaves Ltd (India), Igarashi Electric Works Ltd (IEWL), Japan and International Components Corporation, USA. Over a period, IEWL consolidated its stake in the Company by acquiring a stake of exited JV Partners.  

Stock made a high of Rs 1000 in the year 2017 and from there it started a correction in which it retraced 78% of its previous rally. From this retracement support level, it rallied almost 175%. From February 22, 2023 it was in the making of a trend reversal price pattern known as inverted head and shoulder.

In the last 12 trading sessions it bounced from recent lows and rallied more than 16% which formed a right shoulder of this pattern. Today it surged more than 10% with volumes of above 200 days average. This trading action breached the neckline and registered a breakout of this pattern.  

More than 1 million shares traded today and currently it is trading at Rs 413 which is above the neckline (Rs 400 level) and closing around this level will confirm this breakout. Volume cluster on daily charts is also supporting this up move. All short term and long-term key moving averages, along with 14-day period RSI (72) placed in super bullish zone indicates strong momentum. The measured move target suggests that the stock has the potential to rise 15% from current levels.  

Considering all these factors follow up buying can be expected. Long term investors and breakout traders can add this stock to their watchlist.