Look out for a fresh buy signal in the stock. Usually traders look out for scores of patterns while investors can look out for a few patterns like the head and shoulder pattern, a triangle formation, a double bottom/top formation and a triple bottom/top formation. While going though the charts, many a times an investor finds similar patterns that are being formed in a number of stocks within a particular group or sector.

This is because stocks move in groups and, hence, the similarity in chart formations.

Usually for investors, the ideal time to buy a stock is when the stock is swinging out of its base and moving into a more dynamic stage. However, this may not be possible all the times as the current majoruptrend is already more than a year old and now very few sectors have been swinging out of their bases.

Today I will look at a group: Automobile-Tractors. There are few stocks in this group but the activity in the group is on the rise and higher levels in the stocks will be seen. A few of them could be bottoming out and others may follow suit.

Investors must never try to guess a bottom and pick up a long position on expectation of a strong move on the upside. A stock picked up, when it is bottoming, will result in the investor holding on to the stock for a long time without positive results. And when the actual times comes for the stock to move, the investor is either fed up with the stock and has liquidated it or is in the process of liquidating it without getting the complete fruits of the dynamic move.

After looking out for a breakout, the next important thing that he must be aware of is to where the stop-loss level for the stock is. In case the level for the stock is far away, it means that he ispicking up the stock which has moved quite a bit and must wait for a correction. Usually a previous significant reaction bottom is the best stop. As the stock keeps on moving up, he must also keep on trailing the stops.

Mahindra & Mahindra
Mahindra & Mahindra stock is in a major uptrend since August 1998 when it moved above its long term moving average and its earlier intermediate top. Since that time, the stock has been exhibiting a bullish relative strength and the relative strength line has been staying above its zero line which means that the stock has been out-performing the indices.

Recently, the stock broke out of the sideways formation and is in the all-time new high territory. The stock has been consolidating sideways around the 500 levels and tradrs can also look out for long positions with a stop loss at 476. The relative strength line for the stock is exhibiting higher tops suggesting higher levels in the stock in the next few weeks. Investors must continue to hold on to the longpositions in the stock while traders can look out for long positions on a breakout of the current consolidation formation or at the movement.

Punjab Tractors
Punjab Tractors which was one of the leaders in the tractor sector has topped out in May 1999 and since that time the stock has been exhibiting descending intermediate tops and bottoms. The stock has been staying below its falling 30 WMA and the relative strength line for the stock is bearish indicating that the stock is under-performing the indices.

The intermediate trend of the stock is currently down but the stock has not yet dropped below its earlier intermediate bottom of 975. If the stock bottoms out and goes into a fresh intermediate uptrend and this intermediate uptrend will have to cross 1269 level for the major trend of the stock to turn up. This will also result in the stock completing its double bottom formation. But as explained above, investors must wait for the stock to bottom out and move up and should not pick up thestock in anticipation of a breakout as what looks like a possible double bottom now may not happen and the investor could get stuck up with a stock which is in a major downtrend.

Escorts
Escorts recently went into a strong intermediate uptrend and has closed above its earlier intermediate top of 183.45 to confirm a major uptrend for the stock. The breakout took place with a rise in volume of the stock suggesting that the bulls are quite active and higher levels in the stock will be seen soon. Investors must hold on to the long positions in the stock while as the stock has been moving up since quite some time now, a minor decline in the stock can be used by traders to get into the stock. The next intermediate decline towards the 30 WMA can also be used by investors to add to their long positions in the stock.

Eicher
Eicher topped out in August and is in a major downtrend. The stock has been exhibiting a bearish relative strength and the current inter mediate uptrend has been facing astrong resistance at the falling 30 WMA. The stock is the lagger in the tractor group and investors must stay away from the stock as even though the stock moves up and goes into a major uptrend, the stock will not out-perform the indices and the other stocks within this sector.