Investors with a medium-term perspective and contrarian view can buy the stock of LIC Housing Finance (280.2) at current levels. On Friday, the stock registered a new 52-week low at ₹217 and rebounded strongly.

It managed to gain 9.6 per cent for the session with above average volume.

This rally has resulted in the formation of a bullish engulfing candlestick pattern in the daily chart, which is a bullish reversal pattern. Notably, the stock has a significant long-term support between ₹200 and ₹220. The recent rally has trimmed the stock’s weekly loss to 7.3 per cent.

Further, the stock has formed a hammer candlestick pattern in the weekly chart that is a bullish reversal pattern. Since encountering a key resistance at ₹580 in July 2019, the stock has been in an intermediate-term downtrend. In late February, the stock breached a key support at ₹400 and witnessed a sharp fall in a short span of time. Hence, a corrective rally can’t be ruled out at this juncture.

There has been an increase in weekly volume over the past four weeks. The daily as well as the weekly relative strength indices are featuring in the oversold territory, implying that a price recovery is on the cards.

Similarly, the daily and the weekly price rate of change indicators are hovering in the oversold levels. With the bullish reversal patterns in the daily and the weekly charts, the short-term outlook appears to be bullish for the stock. A strong break above the immediate resistance level of ₹300 will strengthen the bullish momentum and take the stock higher to the medium-term price targets of ₹320 and ₹340 levels, with a minor pause at ₹320.

Investors with a medium-term perspective can buy the stock in dips with a stop-loss at ₹250 levels.

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