Hadrien Mendonca got his first prediction about the Nifty “being on the way to the summit” dead right. His second prediction about the Bank Nifty surging has also came true. His third prediction that the blue chip behemoth Larsen & Tuobro offers a 20% gain is fulfilled to the extent of a 5% gain so far. It would have been more had it not been for the inopportune Iraq crises which spoilt the momentum.
Hadrien’s latest prediction is that Bajaj Auto is “set to vroom“. Lets note his analysis:
“Ascending Triangle Break-Out”
After hitting an intermediate low of Rs1,660 in April 2013, Bajaj Auto has been on a steady uptrend. On the daily charts, strong accumulation was witnessed between Rs1,660 ‐ Rs2,160 for almost 14‐months.
During this consolidation phase, the stock formed an ascending triangle pattern, which is considered to be bullish. For the first time, following a long drawn consolidation, Bajaj‐Auto broke out of the “Ascending Triangle Pattern” on May 23, 2014 on the daily charts. The breach has been accompanied with steady up‐tick in traded volumes, adding credence to the breakout.
Negation of “Head and Shoulder pattern”
The head and shoulder pattern, a bearish one, which is clearly visible on the daily chart has been negated as the stock pushed back above the peak of right shoulder which was placed at Rs2,103 level.”
Hadrien also claims that “Negation of a bearish structure further indicates that Bajaj Auto is on a road to uncharted territory” implying that the gains could be much higher than just 20%.
Now, I am not familiar with the technical jargon but what we have to bear in mind is that Bajaj Auto is a blue chip stock with the highest credentials. Such stocks are meant to be part of the core portfolio. It is difficult to lose money with such stocks in the medium to long-term. Also, as we saw in the analysis on TVS Motors, the time is ripe to tuck into cyclical consumer discretionary auto stocks. Further, while other two-wheeler stocks have zoomed (TVS Motor 3M: 50%, Hero Motor 3M: 20%), Bajaj Auto has lagged with a 3 month return of only 13%. So, it has some catching up to do.
So, my proposition is that even if you are a hard-core fundamental investor, it may be a good idea to listen to Hadrien Mendonca and tuck into Bajaj Auto. Even if Hadrien’s prediction does not come true, you are unlikely to lose money. On the other hand, if the prediction does come true, you can pat yourself on your back for your stock-picking skills.