Investors with medium-term perspective can consider buying the stock of Polaris Software Lab (Rs 140.4) a company catering to the IT needs of banking, financial services and insurance (BFSI) segment.

After encountering significant long-term resistance at around Rs 215 in April, the stock started to decline. Since then it has been on a medium-term downtrend.

However, following a 50 per cent retracement of its prior up move between the first quarter 2009 and April 2011, the stock found support around Rs 120 in early September. Since then, the stock consolidated sideways forming an ascending triangle pattern which acts as a reversal pattern in this case.

Moreover, a positive divergence is shown in daily relative strength index and daily price rate of change indicator supports the stock's recent trend reversal.

On October 14, the stock surged more than 5 per cent with good volume, breaking out of the ascending triangle pattern and a key resistance at Rs 135 levels. We observe that there is an increase in volumes over the past four trading sessions. Daily RSI is on the brink of entering into the bullish zone from the neutral region and weekly RSI has entered into the neutral region from the bearish zone.

The daily moving average convergence divergence indicator is moving higher in line with the stock price and is on the verge of entering into the positive territory. Weekly MACD is recovering from oversold levels. Daily price rate of change is featuring in the positive terrain implying buying interest.

Taking a contrarian view on the stock, we are bullish on the stock from a medium-term perspective. We believe that Polaris Software Lab has the potential to trend northwards and touch our medium-term price target of Rs 165, following a minor pause at around Rs 150 while trending higher.

Investors with a medium-term perspective can consider buying the stock with stop-loss at Rs 126.

Follow up – Excel Crop Care (Rs 148.2)

The stock declined more than 4 per cent in the previous week; however its medium-term outlook remains bullish. We reiterate our medium-term bullish view on the stock with stop-loss and price target mentioned last week.

(This recommendation is based on technical analysis. There is a risk of loss in trading.)

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