We recommend a buy in the stock of Patel Engineering from a short-term perspective. It is apparent from the chart of the stock that it has been trending down since its September 2009 peak of Rs 526. The stock's downtrend accelerated last November and it fell sharply until it found support around Rs 131 in March. However, the stock bounced up from this level, triggered by positive divergence displayed in the daily relative strength index.

In late May, the stock's key support around Rs 131 provided a cushion and restricted the stock from declining further. Subsequently, it rebounded and has been on a short-term uptrend. After jumping almost seven per cent with good volumes on June 1, the stock moved sideways. On Thursday, reinforcing the bullish momentum the stock surged five per cent accompanied by extraordinary volumes, breaking out of the sideways movement and its 50-day moving average.

The daily RSI is on the brink of entering into the bullish zone from the neutral region whereas weekly RSI is inching higher in the bearish zone towards the neutral region. Daily price rate of change indicator is featuring in the positive territory and weekly indicator has entered into this territory signalling buying interest.

We are bullish on the stock from a short-term perspective. We expect it to rally until it touches our price target of Rs 164.5 or Rs 169.5. Traders can buy the stock with stop-loss at Rs 154.5 levels

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