We recommend a buy in the stock of NMDC from a short-term perspective. It is apparent from the charts of the stock that after encountering key long-term resistance at Rs 200 in September 2012, the stock started to decline. Since then, it has been on an intermediate-term downtrend. Nevertheless, after registering a multi-year low at Rs 92, on August 6, the stock changed direction. This reversal was triggered by positive divergence in weekly and daily moving average convergence divergence indicator.
The stock has been on a short-term uptrend from Rs 92. While trending higher, it decisively breached its 21- and 50-day moving averages on Monday. Reinforcing the bullish momentum, the stock conclusively broke out of its immediate resistance at Rs 110 by gaining 5 per cent accompanied by good volumes, on Wednesday. We observe that there is an increase in volume in the past six trading sessions.
The daily relative strength index has entered the bullish zone from the neutral region and weekly RSI has entered the neutral region from the bearish zone. The daily price rate of change indicator is featuring in the positive territory implying buying interest. Our short-term outlook on the stock is bullish. We expect its up move to continue and knock at our price targets of Rs 119 or Rs 121.5 in the ensuing trading sessions. Traders with short-term perspective can buy the stock with stop-loss at Rs 111.8 level.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)