Cummins: Price breakout from the falling supply line, last three month’s base formations augurs well for next up move
The capital goods space is witnessing fresh momentum after the last three month’s base formation and is expected to witness a catch up with the rest of the market.
Cummins India Ltd., a Mid Cap company, was incorporated in the year 1962. It has a market cap of Rs 12677.74 crores and is operating in the Engineering sector. The company, a producer of diesel and natural gas engines, generator sets and their related services operates through two main segments: Engines and Lubes.
In January 2020, its share price fell over 2 per cent. A research house Nomura has downgraded the stock to reduce from neutral and cut target to Rs 570 from Rs 585 per share. Today a consolidation is being witnessed.
o The share price of Cummins India has generated a breakout above the last three month’s higher base formation (Rs 311-439). In the process, it has also closed above the falling supply line joining highs since May 2019 (Rs 801) signalling a reversal of the corrective trend and resumption of the fresh up move, thus offers fresh entry opportunity with a favourable risk-reward set up
o Structurally, the stock in the last three months of base formation has constantly been forming higher lows as can be seen in the adjacent chart highlighting the positive price structure.