We recommend a buy in the stock of Aban Offshore from a short-term horizon. It is apparent from the charts of the stock that from its April 2011 peak of Rs 718, the stock had been on a medium-term downtrend until it found support at around Rs 333 in mid-August. After taking support at around this level in early October, the stock bounced up sharply.
On October 12, the stock surged 4.6 per cent with good volumes, penetrating its medium-term downtrend-line. We notice formation of a double bottom pattern, a bottom reversal pattern since early August with neck line at around Rs 414. The stock jumped five per cent on Wednesday, accompanied by above average volumes, and is testing the neck line. Both daily and weekly moving average convergence divergence indicators are displaying positive divergence backing the stock's change in direction.
Daily relative strength index is about to enter into the bullish zone and weekly RSI has entered into the neutral region from the bearish zone. We anticipate the stock to breach the neckline and reach our price target of Rs 420 or Rs 437 in the ensuing sessions. Traders with short-term perspective can buy the stock with stop-loss at Rs 401.