Automotive industry is the sector with vast majority of market analysts trying to forecast what the next move would be and how long its going to last. Some believe that the recent growth in automotive sector is the optimistic effect of overall market gains, although others disagree and believe this move would last longer and another period of consistent gain in this industry has begun lately.
With the aid of technical analysis, we are trying to figure out which of these two aspects of view is more likely to happen. Below is a demonstration of life-time fluctuations in automotive index. This chart has experienced 2 major impulses since 2008. One from mid-2008 to late 2011 in which the index increased more than 2.5 times (from 2,577.77 to 9,744.07) and the other wave in which, listed companies of the sector gained averagely more than 2 times of their value in a period of almost a year starting from early 2013 (from 4,397.74 to 1,5178.86).
The most important point is that the correction duration followed by these two super rallies equaled to 480 trading days in both cases! This sharp bounce back becomes more significant when it folds on the life-time trend from which all channel lines have derived.
Looking closely to the low of 8,503.95 hit on late 2015 implies more signs of trend reversal when 61.8% retracement of the rally from 4,397.74 to 15,178.86 lies on this zone simultaneously with one of the most important time expansion ratios (361.8%) of the same wave. These technical factors along with the break above the short term bearish trend, raise the probability of a super correction end, although there is still a long way to go in order for this theory to be confirmed.
Solid resistances still remain on 11,099.61 and 12,669.98 levels which are 38.2% and 61.8% retracement of previous bearish wave from 15,282.71 to 8,503.95. On the other side the main support is the recent low of 8,503.95 from which the reverse has occurred.
Considering all above factors, it is most probable that the long term bearish trend is over and another cycle of consistent growth might have started, although a consolidation above 12,669.98 level is needed to confirm in near term. In other words, as far as the previously mentioned support on the chart remains in action, all declines above this level are considered as corrections of initially started rally.