Eicher Motors - 12th Apr

Today's Opening - 21027
Today's High - 21430
Today's Low - 20905
Today's Closing - 21361

Four days of positive closing, with good volumes over the past two days. This is an encouraging sign for the stock.
While the closing has been below the 5-day Exponential Moving Average since 18th Mar, the closing has been above the 5-day EMA level over the past four days.
The 10-day Rate Of Change has been positive for three days in a row, for the first time since 19th Mar.
Similarly, the 10-day Momentum has been positive for three days in a row, for the first time since 19th Mar.

The 20-day Commodity Channel Index has turned positive today for the first time since 20th Mar. While the Negative Directional Index has been stronger than the Positive Directional Index since 29th Mar, the two indices are going neck to neck over the past four days.
The 12, 26-day Moving Average Convergence Divergence has been negative since 29th Mar. The 2-day Relative Strength Index has remained above 45 since 5th Apr.

Corporate Activity:
Eicher Motors has appointed Vinod K Dasari as the CEO of its Royal Enfield unit. Prior to joining Royal Enfield, Dasari was the CEO and Managing Director of Ashok Leyland.
Eicher Motors has announced Rs 700 crore capital expenditure plan for Royal Enfield in 2019-20. The capex will be used for construction work of the Technology Centre, Phase-2 of the Vallam Vadagal plant in Tamil Nadu and towards the development of new platforms and products. To further strengthen its presence in the ASEAN region, it recently announced its upcoming assembly operations in Thailand, its first outside of India.
There are three possible near-term headwinds for the company. Customers are yet to absorb the price hikes in its entirety (almost 15%, Rs 25,000 on an average), secondly, high volume markets such as Kerala (where RE has a 30% market share of overall bike sales) are sluggish, and finally, competition in commercial vehicles remains intense, with the industry continuing to witness aggressive discounting.
Combination of the above factors is also impacting profitability at Volvo Eicher Commercial Vehicles Limited (VECV). The incumbents, Tata Motors and Ashok Leyland, have adopted an aggressive discounting policy to protect their respective market share. As discounts continue to remain elevated, particularly for large fleet orders, VECV's market share has been restricted to 11 percent.
Domestic markets aside, the export initiatives too will take time to pay off.

Stock Outlook:
In my post on 1st Mar, I had mentioned that Eicher Motors was looking extremely weak and can go down to 18800 level. Only if the stock could break the resistance of 21900-22000, we could be sure that the stock had come out of the long bear grip.
Having lost almost 11% over the past six months, the stock actually broke the 21900-22000 resistance on 11th Mar, followed by dropping back to 19921 on 4th Apr. The stock now has a support at 19900-19975 and looks like the stock is getting ready to once again challenge the resistance level of 21900-22000. Keep accumulating on every dip as the downside risk seems limited.

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