Investors with medium-term perspective can consider buying the stock of NMDC (Rs 187.3). The company is involved in the exploration of a wide range of minerals. After marking its life-time high of Rs 571 in January 2010, the stock has been on a long-term downtrend. Both intermediate and medium-term trends are also down for the stock. The stock encountered resistance at around Rs 255 in mid-October this year and resumed its downtrend. However, the presence of significant support in the band between Rs 170 and Rs 180 cushioned the stock's decline last week.

On Friday the stock climbed almost 4 per cent after taking support from the aforementioned band. Moreover, the stock's up move was also triggered by a positive divergence in the daily relative strength index and daily stochastic oscillator that signals a potential trend reversal. The stock is currently hovering around the lower end of the Bollinger band, signalling that it is at an oversold level. We observe that there has been an increase in weekly volumes in the past two weeks. Daily RSI is recovering from the oversold territory and weekly RSI is featuring in the bearish zone. Both daily moving average convergence divergence and price rate of change indicators are featuring in the oversold terrain, signalling a potential recovery in the stock price.

Taking in to consideration that the stock is turning upwards from its significant long-term support band and the daily RSI and oscillator displaying positive divergence and other positive cues from the indicators, we take a contrarian view on NMDC from a medium-term perspective. We believe that the stock has the potential to trend upward and touch our price target of Rs 220, following a small pause around Rs 204. Investors with a medium-term perspective can consider buying the stock in declines while maintaining stop-loss at Rs 170.

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

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