The stock of Sadbhav Engineering gained 11.3 per cent accompanied by above average volume on Monday. After registering an intra-day low at ₹105, it surged higher and closed in green. It has formed a bullish engulfing candlestick pattern in the daily chart implying short term trend reversal.

Investors with a contrarian view can buy the stock at current levels.

Following a sharp decline in the months of July and August the stock found support at ₹105 recently. Positive divergence in the daily relative strength index and price rate of change indicator acted as triggers for the rally of Monday. The daily RSI is recovering from the oversold territory and the price rate of change indicator is likely to enter the positive terrain from the negative.

The weekly RSI and price rate of change indicators are hovering in the oversold territory suggesting possibility of an up-move in the near term.

Moreover, the stock has a significant long-term support in the band between ₹100 and ₹110 from which it had commenced to trend upwards and similar reversal is possible now. Therefore, taking a contrarian stance the short-term outlook is bullish for the stock. It can extend the rally in the coming trading session and reach the price targets of ₹127.5 and ₹130. Traders can buy with a stop-loss at ₹119.5.

(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)

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