We recommend a buy in the stock of Dredging Corporation of India from a short-term perspective. It is seen from the charts of the stock that following sharp up move from December 2011 low at Rs 187, it met with key resistance at Rs 320 in February 2012. Thereafter, the stock witnessed corrective decline. However, significant base in the band between Rs 230 and Rs 240 arrested the stock decline between May and July. This zone also coincides with 61.8 per cent fibonacci retracement level of the stock's December to February up move.
It appears to have resumed its up move after a strong nine per cent gain on Wednesday. The volume that accompanied this move was extraordinary. This rally has breached its moving average compression (21-, 50- and 200-day moving averages) at around Rs 257. The daily relative strength index has entered the bullish zone from the neutral region and weekly RSI is moving higher in the neutral region. The daily moving average convergence divergence indicator has signalled a buy and is on the brink of entering the positive territory.
We are bullish on the stock from a short-term perspective. We anticipate the stock's rally to continue and knock our price target of Rs 283 or Rs 291 in the upcoming trading sessions. Traders with short-term perspective can consider buying the stock while maintaining stop-loss at Rs 266.