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We recommend a buy in the stock of Gujarat Industries Power Company. It is apparent from the charts of the stock that after consistently testing key resistance at Rs 120, the stock reversed downwards in November 2010. Since then, it has been on a medium-term downtrend.
The stock's short-term downtrend that was in place from early January 2011 appears to have ended last week. On February 10, after marking a 52-week low at Rs 80.5 the stock took support and bounced up by 3.5 per cent forming a bullish engulfing candlestick pattern which is a short-term bullish reversal pattern. Moreover, it jumped 6.5 per cent accompanied with good volume on Monday, penetrating a significant long-term resistance at Rs 90. The daily relative strength index is rising in the neutral region towards the bullish zone and weekly RSI has recovered from oversold territory.
Daily moving average convergence divergence indicator has signalled a buy and has started to move upwards. We are bullish on the stock from a short-term perspective. We anticipate it to trend higher until it reaches our price target of Rs 96 or Rs 99. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 91.
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