Amtek Auto

Investors with medium-term perspective can consider investing in the stock of Amtek Auto (Rs 189.7). The company is a major player in the global automotive component industry.

The stock has been on an intermediate-term uptrend from its multi-year low of Rs 42.2 touched in November 2008, forming higher peaks and higher bottoms. It encountered resistance in the band between Rs 230 and Rs 240, after retracing 38 per cent of its prior down-move in October 2009 and was on a corrective decline till January 2010.

Thereafter, the stock's decline was arrested and it began to gain bullish momentum after taking support at Rs 165 which is a key medium-term support as well as the place where the 200-day moving average is placed.

The stock emphatically penetrated the 21- and 50-day moving average compression by gaining 5 per cent on March 22. We notice that there has been an increase in volumes over the past two weeks. The daily relative strength index indicator has entered in to the bullish zone and weekly indicator is rising towards this zone from the neutral region.

Following a buy signal, the daily moving average convergence and divergence has entered in to the positive territory while the weekly MACD is already featuring in this zone.

The short and medium-term outlook is positive for the stock. We believe that it has the potential to head higher to Rs 206 in the short and then to Rs 227 in the medium-term. Investors with short and medium-term perspective can consider buying the stock with stop-loss at Rs 180 and Rs 171 respectively.

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After rallying to a high of Rs 290 last week, the stock witnessed selling interest and slipped 1.5 per cent below our recommended level.

Short-term investors can avoid initiating fresh positions in this counter. However, we re-affirm our bullish medium-term outlook for this stock. Investors can hold it with the targets and stop-loss indicated last week.

via BL