Investors with a medium-term perspective can consider buying the stock of Steel Authority of India (Rs 91.6). SAIL has been on a long-term downtrend from its April 2010 peak of Rs 258.

Breaching many key support levels while trending down, the stock finally found support at it's long-term base zone between Rs 74 and Rs 80 in mid-December 2011. Triggered by positive divergence in daily moving average convergence divergence (MACD) indicator, the stock reversed its direction.

Moreover, the weekly MACD and relative strength index (RSI) are displaying positive divergence signalling a potential medium-term trend reversal.

Since the December tough, the stock has been trending higher.

The stock breached its 21- and 50-day moving averages emphatically and is hovering well above them. On January 11, the stock jumped 4 per cent with good volume penetrating its immediate resistance at Rs 87.

The daily RSI has re-entered the bullish zone from the neutral region and weekly RSI is featuring in the neutral region.

The daily MACD is moving higher in line with the stock price and hovering in the positive territory.

The daily price rate of change indicator is featuring in the positive area signalling buying interest.

Taking into consideration that the stock is reversing upwards from its significant long-term support zone and its weekly indicators and oscillators displaying positive divergences, we take a contrarian view on SAIL from a medium-term perspective.

We believe that the stock has the potential to trend northwards and touch our price target of Rs 110, with a small pause around the psychological level Rs 100. Investors with a medium-term perspective can consider buying the stock in declines with deeper stop-loss at Rs 79.

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

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