100 0
There have been three drives to a bottom in Ashok Leyland over the past six months. July, October and November 2018. All the three drives down have been accompanied by higher volumes. But the support at 105 has held firm. On the chart two things are notable- first, the drive down in November was with a gap and an ominous looking long body bearish candle. It would have been natural to consider that the bottom would break with this onslaught. But 105 continued to hold firm. Second, the bottom in October showed a Class 2 divergence on the RSI and this was followed up by another Class 1 divergence (the classical one) in November bottom. So what you have is a strong support, tested by high volume drives to break it and now divergence pattern formations, signaling a possible end of the decline.
Two resistance trendlines have been drawn. These encompass the three bottoms formed so far. A breakout past the resistance trendline now would signal a reversal. Ideally, such breakouts should be accompanied by high volumes as well. Momentum improvement should accompany new rise attempts. Breakout occurs above 112 at the time of writing.
The low of October (at 101) is probably the bottom as the candle pattern there shows a nice longish lower shadow, implying buying emerged there. The November bottom is a retest of the low with a slight higher bottom at 105. One can therefore set a stop beneath 100 on any longs that may be initiated upon a breakout. it can then be moved higher if the rise unfolds as expected.
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