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We recommend a buy in the stock of Reliance Power from a short-term horizon. It is apparent from the charts of the stock that ever since encountering resistance at around Rs 190 in November 2010, it has been on an intermediate-term downtrend. Following a medium-term decline from July peak of Rs 120, the stock found support in late August at Rs 77.
Triggered by positive divergence displayed in the daily relative strength index and daily price rate of change indicator, the stock changed its direction. Taking support at Rs 77 in the previous week, the stock started moving higher.
On Tuesday, the stock rose almost five per cent with above average volumes, breaching its 21-day moving average. This up move has reinforced the bullish momentum in the stock.
Daily RSI has entered into the neutral region from the bearish zone and weekly RSI has recovered from oversold levels. The daily price rate of change indicator has entered into the positive territory signalling buying interest. Taking a contrarian stance on the stock we are bullish on it from a short-term horizon.
We anticipate its up-move to continue and reach our price target of Rs 86.5 or Rs 89 in the forthcoming trading sessions. Traders with short-term perspective can buy the stock with stop-loss at Rs 81.5.
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