These auto-complementary stocks see a multi-month trend reversal. Here is a technical analysis

Despite a weak start, markets staged a notable recovery on Friday before finishing flat. The Nifty saw a weak opening; it opened lower and drifted further to form the day’s low in the first hour of the session. However, markets subsequently staged a notable recovery for the remainder of the session. It managed to make up almost all of its opening losses. The headline index closed with a negligible loss of 17.40 points (-0.07%).This auto sector stock from the broader markets confirms a trend reversal. A move from current levels would mark the reversal of the multi-month downtrend in the stock and act as a confirmation of it.

SONACOMS or Sona BLW Precision Forgings has been in a multi-month downtrend for over a year. It has lost significant ground from the levels of Rs. 760 in September last year to the lows formed near Rs. 370 in April this year. However, in recent months, the stock has been working hard to build a base for itself. The recent price action over the past few days shows that the stock is about to confirm a multi-month downtrend reversal. The price action also shows that the stock has gained support at its 200-DMA in recent days, now trading above all major moving averages.

The daily MACD is bullish and remains above its signal line. The RSI has hit a new 14-period high, which is bullish; it also remains neutral and shows no deviations from the price. The RS line against the broader Nifty 500 Index has reversed its trend; the trend is now higher and is above the 50 period MA. The stock is currently in the leading quadrant of the RRG when compared to the broader Nifty 500 Index.

The OBV has risen sharply and is at a new high, confirming strong volume participation in this move. A step up is likely to take SONACOMS to Rs. 520.

A cutoff below Rs. 475 would negate the current technical setup.