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We recommend a buy in the stock of Madhucon Projects from a short-term horizon. It is seen from the charts of the stock that it has been on a long-term downtrend ever since peaking out at the January 2010 high of Rs 197. The intermediate-term trend has been down from the April 2011 peak of Rs 112. But, the stock's long-term support band between Rs 47 and Rs 50 arrested its decline last November.
The stock, thereafter, changed its trend triggered by positive divergence in daily as well as weekly relative strength index. After forming a strong base around the aforesaid key support band, it once more started to move higher. On Tuesday, the stock jumped 6.5 per cent conclusively penetrating its downtrend-line. There is an increase in volumes over the past two trading sessions. Further, the stock is hovering well above its 21- and 50-day moving averages.
The daily RSI is featuring in the bullish zone and the weekly RSI has entered into the neutral region from the bearish zone. The daily MACD is inching higher in line with the stock price and is about to enter the positive area. Taking a contrarian stance on the stock, we are bullish on it from a short-term horizon. We expect the stock's rally to prolong and touch our price target of Rs 59.5 or Rs 61.5 in the ensuing trading sessions. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 56.
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