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We recommend a buy in Zenith Computers at current market price. From the weekly chart of Zenith Computers, we note that it has been trending downwards since the May 2006 high of Rs 113. However, the stock found support around Rs 38 in November 2007 and bounced up and penetrated the medium-term down trendline.

We see that the stock’s price action from July 2007 has formed an inverse head and shoulders pattern with neckline at Rs 50. On December 10, the stock broke out of this pattern by gaining 5 per cent, accompanied with heavy volume. With this break through, the stock has closed above 200-day moving average line. The weekly momentum indicator is displaying positive divergence and the daily momentum indicator is featuring in the bullish region. Moving average convergence divergence has entered the positive region from negative, showing bullish momentum. The immediate support for the stock is pegged at Rs 43.5 and the next support is at Rs 38. Short-term investors can buy the stock while keeping their stop-loss at Rs 45. We expect the stock’s current up move to continue further to the inverse head and shoulders target of Rs 62 in the short-term.

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