Investors with medium-term perspective can consider buying the stock of Mandhana Industries (Rs 237). The company makes garments for the export market and fabric for the domestic market. Ever since its listing in May 2010, the stock has been trending up. However, after registering an all-time high at Rs 320 on January 5, the stock was on medium-term downtrend till if found support at Rs 180 in mid-May. After forming a strong base at Rs 180, the stock resumed its upward journey, triggered by positive divergence in daily relative strength index and moving average convergence divergence indicator. Since then, the stock has been on a medium-term uptrend forming higher peaks and troughs. In the last two weeks the stock has climbed more than 12 per cent conclusively, breaking through its immediate key resistance at Rs 220. We notice that there in an increase in volumes over the past two weeks backing the stock's up-move. Moreover, the stock has breached its 200-day moving average in the previous week and is trading well above its 21- and 50-day moving averages. Both daily and weekly RSI are featuring in the bullish zone. Daily MACD is hovering in the positive territory whereas weekly MACD is on the brink of entering this territory, implying upward momentum. Daily as well as weekly price rate of change indicators are hovering in the positive area indicating buying interest. Considering that the stock's medium-term uptrend line is in tact and aforementioned positive facts, we are bullish on the stock from a medium-term perspective.
We believe that Mandhana Industries has the potential to trend northwards and touch our medium-term price target of Rs 275, following a small pause around Rs 260. Considering the short-term broader market volatility, investors with a medium-term perspective can make use of declines to buy the stock with stop-loss at Rs 214 levels.
(This recommendation is based on technical analysis. There is a risk of loss in trading.)