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We recommend a sell in Bajaj Auto at current levels. After marking a life high at Rs 3,325 in May 2006, Bajaj Auto has been in a long-term downtrend; moving within a downward moving channel. The nascent rally that commenced from the July low of Rs 2,100 was arrested at the key resistance around Rs 2,700 and the stock has resumed its long-term downtrend since then.

We see that this decline has penetrated the medium-term uptrend line. Moreover, the daily momentum indicator is displaying bearish divergence, indicating a sell. The immediate resistance for the stock is at Rs 2,700 and the next resistance is at Rs 2,800. Short-term investors can sell this stock with stop-loss at Rs 2,615. We expect the stock to decline further and meet our immediate target of Rs 2,400 and then Rs 2,200, in the short-term.

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