Investors with medium-term perspective can consider buying the stock of VA Tech Wabag (Rs 440). The company is a supplier of systems for water and waste-water management. The stock bottomed out in December 2011, registering a 52-week low at Rs 270.

Since then, the stock has been on a medium-term uptrend. However, following a corrective decline, retracing 38.2 per cent Fibonacci retracement level of the stock's prior up move, it found support around Rs 390 last week. Triggered by positive divergence in the daily price rate of change indicator, the stock resumed its uptrend.

On Friday, the stock jumped 8 per cent with an upward gap.

We notice that there is an increase in volumes over the past two trading sessions. The stock has skyrocketed 11 per cent with good volumes in the previous week. The daily relative strength index is hovering in the bullish zone and weekly RSI is on the brink of entering into this zone from the neutral region.

The daily moving average convergence-divergence indicator has signalled a buy. Both daily as well as weekly price rate of change indicators are featuring in the positive terrain implying buying interest. Our medium-term outlook on the stock is bullish.

We believe that VA Tech Wabag has the potential to rally and reach our medium-term price target of Rs 500, following a minor pause around Rs 470. Investors with medium-term perspective can consider buying the stock with stop-loss at Rs 409.

Follow up — NIIT Technologies (Rs 290)

In line with our view, the stock moved higher last week. It advanced one per cent. We reiterate our medium-term bullish outlook on the stock while maintaining stop-loss and price target mentioned last week in this column.

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

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