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Investors with a medium-term horizon and contrarian view can buy the stock of General Insurance Corporation of India — a state-owned enterprise. The stock surged 6.5 per cent with good volume on Friday, breaking above a key medium-term resistance at ₹205. This rally has upped the weekly gain to 14.3 per cent and strengthened the short-term uptrend.
In late August this year, the stock recorded a new low at ₹154 and halted its long-term downtrend. Subsequently, it changed direction, triggered by positive divergence in the daily relative strength index and price rate of change indicator. Since then, the stock has been in a short-term uptrend. During the uptrend it had decisively beached the 21- and 50-day moving averages in the previous week. It trades well above these moving averages.
The daily RSI features in the bullish zone and the weekly RSI has entered the neutral region from the bearish zone. Also, the daily price rate of change indicator hovers in the positive territory, implying buying interest. There has been an increase in daily volume over the past two weeks. Taking a contrarian view from a medium-term perspective, the outlook appears bullish for the stock. It can continue to trend upwards and reach the price targets of ₹240 and ₹260 with a minor pause at ₹240 levels. Investors with a medium-term view can buy with a stop-loss at ₹195.
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