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Investors with medium-term perspective can consider buying the stock of Advanta India (Rs 238.3), an agricultural seed producer.
The stock has been on a long-term downtrend from its all-time high of Rs 1,740 marked in January 2008. Its intermediate-term trend is also down for the stock.
In November 2010, the stock tested its significant long-term resistance around Rs 500 and resumed its downtrend which accelerated later. However, the stock's medium-term downtrend was arrested after it found support around Rs 214 in early May 2010.
In the last week of May, the key support around Rs 214 has cushioned the stock and halted it from declining further. Triggered by positive divergence in the daily moving average convergence divergence as well as price rate of change indicator and weekly relative strength index, the stock changed its direction.
On June 2, the stock almost jumped 10 per cent conclusively breaking through its down trendline, which was intact since last November and its 21-day moving average.
We notice that there has been an increase in volumes in the last two trading sessions.
The weekly Stochastic Oscillator is also displaying a positive divergence backing this trend reversal.
The 14-day RSI is inching higher in the neutral region towards the bullish zone whereas the weekly RSI is recovering from the oversold territory.
Daily MACD has signalled a buy. Taking into consideration the stock's breach of its down trend-line and the weekly indicators and oscillator showing positive divergence we take a contrarian stance on the stock from a medium-term perspective.
We believe that Advanta India has the potential of trending northwards until it reaches our price target of Rs 286 with a likely pause around Rs 263 in the medium term. Investors with medium-term perspective can consider buying the stock with stop-loss at Rs 213.
Follow up – Ramky Infrastructure (Rs 285.5)
The stock marginally inched upwards by climbing one per cent during last week. We reiterate our medium-term bullish outlook on the stock with price target and stop-loss mentioned last week.
(This recommendation is based on technical analysis. There is a risk of loss in trading.)
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