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We recommend a buy in the stock of Chennai Petroleum Corporation from a short-term perspective. It is apparent from the charts of the stock that it has been trending higher since marking its 52-week low at Rs 117 in late July 2012.The reversal was triggered by positive divergence in weekly relative strength index. For the past one month, the stock has been sideways with positive bias.
On Monday, the stock breached its 21- and 50-day moving averages by gaining more than 2 per cent with good volume. This rally has reinforced bullish momentum on the stock and it has possibility of breaking out of sideways trading range. The daily relative strength index has entered the positive zone and weekly RSI is climbing in the neutral region. Both daily and weekly price rate of change indicators are hovering in the positive terrain implying buying interest.
We are bullish on the stock from a short-term perspective. We anticipate its rally to continue and reach our price target of Rs 138 or Rs 141 in the forthcoming trading sessions. Traders with short-term perspective can consider buying the stock while maintaining stop-loss at Rs 130 levels.
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