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We recommend a buy in the stock of ABG Shipyard from a short-term perspective. It is seen from the charts of the stock that its medium-term downtrend which started from its November 2010 peak of Rs 498 was arrested in February 2011 at the longer-term support at Rs 330. The stock, however, changed direction and has been on a short-term uptrend since then. While trending higher, it breached its downtrendline as well as its 21- and 50-day moving averages in late March. The stock is currently hovering way above these averages and also 200-day moving average.
On Thursday, the stock jumped five per cent accompanied by good volumes reinforcing the short-term uptrend. The stock appears to have resumed its long-term uptrend that has been in place from its 2009 low of Rs 62. The 14-day relative strength index is featuring in the bullish zone and weekly RSI is on the brink of entering into this zone from the neutral region. Both the daily and weekly moving average convergence divergence indicators are hovering in the positive territory implying upward momentum.
Our short-term forecast on ABG Shipyard is bullish. We expect up move to continue until it reaches our price target of Rs 412 or Rs 425 in the forthcoming trading sessions. Short-term traders can buy the stock with stop-loss at Rs 389 levels.
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