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We recommend a buy in the stock of UB Engineering from a short-term perspective. It is seen from the charts of the stock that after recording an all-time high at Rs 239 in August 2010, the stock started declining and has been on an intermediate-term downtrend. In early February, this downtrend accelerated and the stock declined steeply. However, presence of significant long-term support in the band between Rs 70 and Rs 80 arrested the stock's decline thereafter. The stock once more took support from this band last week and bounced up strongly on Friday. This up move was triggered by positive divergence displayed in the daily relative strength index and moving average convergence divergence.
On Wednesday, the stock broke out of a flag pattern by jumping eight per cent. We notice that there is an increase in volumes over the past four trading sessions. The daily RSI is rising towards the bullish zone in the neutral region and weekly RSI is recovering from the oversold territory.
Taking a contrarian stance on the stock we are bullish on it from a short-term perspective. We anticipate it to move higher until it reaches our price target of Rs 96 or Rs 99 in the forthcoming trading sessions. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 90.5 level.
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