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We recommend a buy in Action Construction Equipment at current level. The stock fell sharply from its life-time high at Rs 400 to the trough at Rs 162 in March.

It has gained over 100 per cent since this low. The movement since May can be enclosed within a regression channel. The lower boundary of the channel at Rs 300 is expected to support the stock in a sharp decline.

Though the stock is pausing around the support at Rs 330 (floor of November 2006 gap), the sequence of higher peaks and troughs since the March trough makes the outlook very positive.

We believe that the current correction is the right time for the short-term investors to take long position with a stop at Rs 310. We expect the stock to move up to Rs 370 in the short term. Medium term investors can add this stock to their portfolio with stop at Rs 295 and with the target of Rs 400.

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