Shares of Shriram Transport Finance, which rallied more than 100 percent in the past year, have moved in a pattern that makes technical analysts optimistic about another 25 percent upside in three to four months.
The company’s shares have outperformed the Nifty50 that rose 42 percent in the same period in the past year. On the year-to-date (YTD) basis also, Shriram Transport’s rise of over 30 percent beats Nifty50’s 13 percent gain and BSE100’s 14 percent increase.
The stock with a market-capitalization of more than Rs 37,000 crore hit a 52-week high of Rs 1,534 on the BSE on 15 February 2021. Since then, it has been consolidating.
It approached the 52-week high of Rs 1,534 in June, when it touched Rs 1528 on the BSE but failed to surpass the peak and dipped towards 1326 (intraday) on the BSE on July 26, 2021.
Technical analysts said that as per the Elliot Wave theory, prices are currently trading in 4th wave consolidation, and the fifth wave is still pending. The momentum could take the stock above Rs 1,700 levels in the next 3-4 months which translates into an upside of about 25 percent from the July 26 price.
According to the Elliot Wave Theory of market behaviour, which was published by Ralph Nelson Elliott in the 1930s, the stock market follows a pattern of five waves up and three waves down to form a complete cycle.
“Since March 2020, prices are rising in higher top higher bottom formation within an upward sloping parallel formation. As per Elliot wave theory, prices are currently trading in 4th wave consolidation marked with a-b-c-d-e (Symmetrical triangle) which is part of larger impulse wave (1-2-3-4-5),” Jignesh Pandya, Sr. Research Analyst at Monarch Networth Capital, said.
“Going ahead, the fifth wave is pending on higher side and price breakout with supportive volume above the immediate resistance of 1,480 level will trigger strong momentum towards 1,600 – 1,725 levels,” he said.
Pandya recommends buying the stock at the current level or on confirmation above 1,480 level keeping 1,220 as ‘stop loss’ and target of 1,600–1,725 levels.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.