The stock of Chambal Fertilisers and Chemicals gained 9.7 per cent , accompanied by above-average volume, on Friday, bouncing from a significant long-term support at ₹135.

With this rally, the stock managed to erode the intra-week loss, and closed in green, forming a hammer candlestick pattern in the weekly chart, which is a bullish reversal pattern. This, coupled with a reversal from the long-term support, provides investors with a medium-term horizon — an opportunity to buy the stock at current levels.

After recording a 52-week high at ₹196 in early this June, the stock began to decline steadily, breaching a key support at ₹170 and ₹158. But it found support at the long-term base level of ₹135, which has cushioned the stock in the past.

Triggered by positive divergence displayed in the daily relative strength index and price rate of change indicator, the stock changed direction recently.

 

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The daily RSI has entered the neutral region from the bearish zone. Also, the daily price rate of change has moved into the positive terrain, implying buying interest.

Taking a contrarian stance, the medium-term outlook appears to be bullish for Chambal Fertilisers and Chemicals.

The stock can continue to trend upwards and reach the price targets of ₹169 and ₹178 in the medium term, with a minor breather at around ₹160.

Traders with a medium-term view can buy the stock with a stop-loss at ₹137.

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