Investors with a short-term perspective can buy Tata Chemicals at current levels. The key long-term support at Rs 240 arrested the stock’s intermediate-term downtrend in August 2013. The stock reversed this trend accompanied by positive divergence in the daily moving average convergence divergence indicator. Positive divergence is used to spot potential reversal in downtrends. The relative strength index, plotted in the weekly chart, is also displaying positive divergence backing the stock’s trend reversal. Last week, the stock gained 5 per cent accompanied by good volumes. It has also breached its immediate resistance at Rs 255. Further, the stock is trading above its 21- and 50-day moving average lines. Indicators in the daily chart are hovering in the positive territory, indicating bullish momentum. Traders can buy the stock with a stop-loss at Rs 255.5 level. The stock has the potential to move upward and reach the price target of Rs 272 or Rs 277 in the short-term.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)