Where will Maruti Suzuki stock head from here?

The stock of Maruti Suzuki India Limited had given a neckline breakdown of Adam & Adam double top pattern on January 28, 2021. Thereafter, the stock has marked the sequence of lower tops and lower bottoms. Currently, the stock is trading 18.05 per cent below its 52-week high, which was registered in the month of January 2021.   

On Tuesday, the stock had opened with a downside gap below its prior day’s close. After registering the low of Rs 6,468.80, the bulls came out with blazing guns and ended the day up by nearly 5 per cent at Rs 6,815.80 level. The price action has formed a bullish engulfing candlestick pattern on the daily chart. The bullish engulfing candlestick pattern is considered to be a bullish reversal pattern and usually occurs at the bottom of a downtrend. Interestingly, this bullish formation occurs near the horizontal trendline support, which indicates that the bulls are taking control near the support zone.  

Further, the stock has also managed to close above its short-term 8-day EMA level and started edging higher. In addition, the 20-day EMA is losing its downside momentum considerably, which is a bullish sign.    

From the momentum indicators’ perspective, the 14-period daily RSI has given a positive crossover along with the downward sloping trendline breakout, which is a bullish sign. Interestingly, from the beginning of April, the price of the stock is marking lower lows but the stochastic is marking higher lows. This indicates a limited downside for now.   

Going ahead, if the stock sustains above Tuesday’s session high of Rs 6,845.40 and trades convincingly above this level, then there is a high probability that Tuesday’s lowest point of Rs 6,468.80 would become a temporary bottom for the stock.