The stock of Amara Raja Batteries recorded an all-time high at Rs.1,132 in August 2015. Thereafter, it changed direction triggered by negative divergence in the relative strength index.
Since then, the stock has been on a medium-term downtrend. Short-term trend is also down.
However, the stock has a significant long-term support at around Rs.800, which also coincides with 38.2 per cent Fibonacci retracement level of the stock's prior up leg. The stock trades well below its 50 and 200-day moving averages.
You can wait and watch for the stock to rebound up from Rs.800 and then consider averaging the stock with a stop-loss at Rs.750.
A strong upward reversal from Rs.800 can signal bullish momentum and take the stock up to Rs.900 initially and then to Rs.1,000 in the medium term.
But a conclusive plunge below Rs.800 will have bearish implications and drag the stock to Rs.720 or Rs.700 levels in the medium term. Targets are Rs.1,050 and Rs.1,130 levels.