We recommend a buy in the stock of Hindustan Zinc from a short-term perspective. It is apparent from the charts of the stock that since December 2011, the stock has been in a broad sideways consolidation phase in the range between Rs 115 and Rs 145. After encountering resistance at the upper boundary in December 2012, the stock started to decline and has been in a medium-term downtrend. However, the stock’s lower boundary at Rs 115 arrested its decline in late February this year.

Subsequently, taking support at Rs 115, the stock reversed higher from triggered by positive divergence in the daily relative strength index and price rate of change indicator. On Wednesday, the stock gained 4 per cent accompanied by above average volume. We notice that there has been an increase in daily volume in the past six trading sessions. The daily moving average convergence divergence indicator is hovering in the oversold area indicating recovery in the stock price. Taking a contrarian stance on the stock, we are bullish on it from a short-term perspective. We anticipate the stock’s rally to continue and reach our price target of Rs 125 or Rs 127.5 in the approaching trading sessions. Traders with short-term horizon can consider buying the stock with stop-loss at Rs 117.5 levels.

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