An impressive gain of over 200% in less than 3 months caused Iran Khodro Company (Symbol : IKCO1) one of the several local auto makers in Iran- to become the market’s leader among various companies listed on Tehran Stock Exchange. Considering this huge move from 1500 Rials in late 2015 to all-time high of 4784 Rilas on March 3rd 2016, speculations to hit higher prices in this share has risen by market participants. Below is the technical and price action analysis of its chart to figure out which direction has more odds to move in mid-term.
From technical point of view, the all-time zone of 4700 Rials was a solid resistance, not only due to 161. 8% level of Fibonacci Extension from its previous super cycle impulsive wave, but also 200% level of Fibonacci Expansion from the last major corrective wave.
(Image1: 200% level of Fibonacci Expansion from the high of 2920 to low of 1496)
(Image2: 161.8% level of Fibonacci Extension)
This resistance zone has become even more critical while the upper channel line also overlaps pre-mentioned fibo ratios. Looking more precisely to the price action on this area, reveals that another try to break above the all-time high has been failed to pass the zone so far. This fluctuation is more apparent in the picture below.
(Image3: break out failure in 4700 Rials zone)
Main supports lie on 3668 Rials overlapping 127.2% level of fibo expansion from previous corrective sub wave with the bearish channel and also 3419 Rials which is 38.2% level of retracement from the whole impulsive wave. The MACD oscillator is getting closer to zero line which strengthens the possibility of forming a hidden divergence between the start of the bullish wave and the probable reverse zone on either supports aforementioned.
It is not surprising to see the prices decline in near term although it might be more time consuming rather than a sharp decline in prices as the gain had been so sharp prior to the correction start.
It is worth considering that a move above 4600 Rials zone is needed in our view to improve the odds of forming a new high which will be at around 5300 Rials zone in near term.
Assuming all above factors, it is believed that the bullish trend is still in action in mid-term and any decline in short term will be interpreted as a correction while 2950 Rials zone is held.