We recommend a buy in the stock of Tata Metaliks from a short-term perspective. It is apparent from the charts of the stock that after encountering key resistance around Rs 160 in October 2010, it has been on an intermediate-term downtrend. Medium-term trend is also down from this April peak of Rs 130.
However, the stock found support at its long-term base zone between Rs 67 and Rs 70 in late August and bounced up. The stock's reversal was also triggered by positive divergence in its daily relative strength index. Following a pennant pattern formation, the stock broke through this pattern by gaining more than 12 per cent on Tuesday.
The volume accompanying this surge was extraordinary. The daily RSI is on the brink of entering in to the bullish zone and weekly RSI entered into the neutral region from bearish zone. Daily moving average convergence divergence is moving higher in line with the stock price signalling upward momentum.
Daily price rate of change indicator is featuring in the positive territory implying buying interest. Our short-term outlook on the stock is bullish. We expect its up move to continue until it hits our price target of Rs 87.5 or Rs 90 in the ensuing trading sessions. Traders with short-term perspective can buy the stock with stop-loss at Rs 82.5.
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