We recommend a buy in the stock of ABG Shipyard from a short-term horizon. It is evident from the charts of the stock that, since encountering resistance in the band between Rs 400 and Rs 410 in early January this year, the stock started to decline. In late February, the stock broke through key long-term support at Rs 340. However, it found support at around Rs 230 and bounded up. After a near-term decline, the stock recently took support at around Rs 270 and changed direction, triggered by positive divergence in daily relative strength index and price rate of change indicator.
On Tuesday, the stock jumped 13 per cent with above average volume breaking its key immediate resistance at Rs 300. The daily RSI has entered the neutral region from the bearish zone and weekly RSI has recovered from oversold area. The daily moving average convergence divergence indicator has signalled a buy.
Taking a contrarian view on the stock, we are bullish on it from a short-term perspective. We anticipate its rally to continue and reach our price target of Rs 332 or Rs 339 in the ensuing trading sessions. Traders with a short-term perspective can consider buying the stock with stop-loss at Rs 312.5 level.