Investors with a high risk appetite can buy the stock of Chennai Petroleum Corporation at current levels.
Following a long-term downtrend, the stock registered a multi-year low at ₹47.7 in May this year and found support.
Subsequently, it changed direction and began to trend upwards, triggered by positive divergence on the weekly relative strength index.
The stock had been on a medium-term uptrend until it encountered a resistance in the band between ₹93 and ₹95 in late July.
But then it began to correct from this barrier and was on a short-term corrective decline till mid-October.
A key support at around ₹63.5 provided base for the stock and it subsequently bounced up strongly, breaching the 21- and 50-day moving averages. The stock now trades well above these moving averages.
On Friday, it gained 4.3 per cent with above-average volume, recouping the initial loss, and closed almost flat for the week. The short-term trend is positively biased as the stock tests a resistance at ₹80. The risk-reward profile is also favourable for the bulls.
An emphatic break above ₹80 can take the stock north to ₹90 and then to ₹93 over the medium term. Traders can buy the stock with a stop-loss ₹69.