Aries Agro (Rs 45): Buy

We recommend a buy in the stock of Aries Agro from a short-term perspective with stop-loss at Rs 43.5. It is evident from the charts of the stock that it has been on a medium-tem downtrend from its October 2012 high of Rs 74. Short-term trend is also down for the stock. However, after registering a 52-week low at Rs 37, the stock gained 20 per cent on Thursday. The stock has breached its immediate resistance at Rs 41 and its 21-day moving average. The stock’s trend reversal is triggered by positive divergence in the daily moving average convergence divergence indicator and weekly relative strength index. We notice that there is an increase in daily volume in the past six trading sessions. Moreover, backing the reversal, the stock has formed a bullish engulfing candlestick pattern in the weekly chart which is a bullish reversal pattern. The daily RSI is moving higher in the neutral region towards the bullish zone and weekly RSI is on the brink of entering the neutral region from the bearish zone. The daily MACD has signalled a buy. Taking a contrarian view on the stock we are bullish on it from a short term perspective. We expect its rally to continue and reach our price target of Rs 48 or Rs 50.5