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We recommend a buy in the stock of Elgi Equipments from a short-term perspective. It is apparent from the charts of the stock that it has been on a long-term uptrend from its March 2009 trough around Rs 14, forming higher peaks and higher troughs. In early February 2011, the stock found support (200-day moving average) around Rs 75 following a corrective decline from its November 2010 peak of Rs 106. The stock resumed its long-term uptrend triggered by positive divergence in the daily relative strength index. Since then, the stock has been on a short-term uptrend as well.
Reinforcing this trend, it jumped almost six per cent accompanied by good volume on Wednesday. Moreover, it is hovering well above its 21- and 50-day moving averages. The daily RSI has entered the bullish zone and weekly RSI is on the brink of entering this zone from the neutral region. Daily moving average convergence divergence indicator has entered positive territory implying upward momentum. Our short-term forecast for the stock is bullish.
We expect it to move higher until it touches our price target of Rs 94 or Rs 96 in the forthcoming trading session. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 88.
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