This stock delivered 10% average return in last 10 Octobers; should you buy?

Shares of TVS Motor Company Ltd have fallen around 2 per cent in October so far. But if history is to go by, the two-wheeler stock could be in for a recovery ahead. In the last 10 years, the stock has closed higher in eight Octobers, with an average return of 10 per cent for the month. JM Financial said it sees the stock at Rs 3,000 as a strong reversal is in the offing. It suggested traders to keep a stop loss below Rs 2,550 level on a closing basis.

On Wednesday, the stock rose 1.12 per cent to hit a high of Rs 2,794.70. With this, the stock is down 1.7 per cent in October so far.

The scrip has declined from a high of Rs 2,958 level to a low of Rs 2,621 level recently. The fall was on the back of lower than average traded volumes and delivery volumes. Tuesday's trading volumes stood at 0.7 million shares against last 10-session average of 1.1 million, shares while delivery volumes stood at 0.3 million shares against an average of 0.6 million shares. Overall data indicates lack of aggressive cash sellers at these levels, JM Financial said.

On the chart, the stock formed a 'Bullish Engulfing' pattern, a bullish formation. 

The current series has started with a cumulative future open interest of 7.6 million shares against the last 3-series average of 5.8 million shares observed on the day of inception. Open interest currently stands at 7.8 million shares. 

"Despite a sharp sell-off observed in the current series, lack of any major unwinding of long positions indicates lower probability of any sustained selling," JM Financial said.

On a 1-month basis, the stock has underperformed Nifty by 3 per cent.