We recommend a buy in the stock of Tata Power from a short-term horizon. It is apparent from the charts of the stock that it has been on an intermediate-term downtrend since encountering resistance at around Rs 110 in early January. In early August, the stock witnessed sharp sell-off breaching its key supports. However, the stock found support at around Rs 70 and started to move sideways thereafter. After re-testing this support in early September, the stock began to trend upwards triggered by positive divergence in weekly relative strength index and weekly price rate of change indicators.

Last week, the stock gained 10 per cent with good volume. Further, On Wednesday the stock advanced 3 per cent reinforcing its short-term uptrend. The daily RSI is inching higher in the neutral region towards the bullish zone and weekly RSI is hovering in the neutral region.

As the stock is reversing higher from a key support at Rs 70, backed with positive divergence, we are bullish on it from a short-term perspective. We anticipate its current up move extend and reach our price target of Rs 81.5 or Rs 83.5 in the approaching trading sessions. Traders with short-term perspective can buy the stock with stop-loss at Rs 76 level.

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

(This article was published on September 18, 2013)
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