We recommend a buy on the stock of Aban Offshore, the country’s largest offshore drilling contractor in the private sector. After marking a multi-year low at Rs 200 on July 31, the stock started to move sideways taking support in the band between Rs 200 and Rs 210. It has been on a medium-term downtrend from its May peak of Rs 339. On Thursday, the stock surged 4.6 per cent accompanied by extraordinary volume, reversing up from the support zone. This reversal was triggered by positive divergence in daily moving average convergence divergence indicator and weekly relative strength index. The stock has breached its 21-day moving average also denoting bullish short-term trend. The daily RSI is climbing higher in the neutral region towards the bullish zone and weekly RSI is likely to enter the neutral region from the bearish zone. The daily MACD has signalled a buy and is moving higher in line with the stock price.

Taking a contrarian stance on the stock, we are bullish on it from a short-term perspective. We anticipate the stock’s up move to continue and hit our price target of Rs 233.5 or Rs 238 in the approaching trading sessions. Traders with short-term perspective can buy the stock with stop-loss at Rs 219.

(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)

(This article was published on September 26, 2013)
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