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We recommend a buy in Aventis Pharma from a short-term perspective. We note that this stock has been on a very long-term downtrend from its May 2006 high of Rs 2,125.

However, the stock found support at around Rs 700 in early July 2008 which is a significant long-term support level and began to move upward. On July 23, the stock jumped up by 7 per cent penetrating the medium-term down trend line (which was in plac e from March 2008) as well as its 50-day moving average. We notice a prolonged positive divergence in the weekly relative strength supporting the stock’s recent reversal.

The daily relative strength index has entered in to the bullish zone from the neutral region. The daily moving average divergence (MACD) also displays positive divergence and is on the brink of entering the positive territory. The stock is trading well above 21- and 50-day moving averages. We are bullish on the stock in the short-term.

We expect the stock’s current up move to continue until it hits our price target of Rs 850 in the forthcoming trading sessions. Traders with short-term perspective can buy the stock while maintaining stop-loss at Rs 738.

Yoganand D.

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