Investors with medium-term perspective can consider buying the stock of BEML (Rs 543). Ever since it encountered resistance in the band between Rs 1200 and Rs 1240 in September 2010, the stock was on a long-term downtrend until it found support at its long-term base level around Rs 420 in August this year.
However, the stock changed its direction subsequently triggered by prolonged positive divergence in weekly relative strength index as well as weekly moving average convergence divergence indicator. The stock has been on a nascent medium-term uptrend from its 52-week low of Rs 413 registered on August 19. While trending northwards, the stock broke through its medium-term down trend-line that was in place from this April, at around Rs 460 by jumping 10 per cent during second week of October. The stock is trading well above its 21- and 50-day moving averages. We notice that there is an increase in weekly volumes over the past three weeks.
Daily RSI is featuring in the bullish zone and weekly RSI has entered in the neutral region from the bearish zone. Daily MACD is hovering in the positive territory indicating upward momentum. Both daily as well as weekly price rate of change indicator are featuring in the positive terrain implying buying interest. We are bullish on the stock from a medium-term perspective.
We believe that BEML has the prospect of trending upwards and reaching our price target of Rs 640, following a minor pause around Rs 590. Investors with medium-term perspective can consider buying the stock in dips while maintaining deeper stop-loss at Rs 490.
Follow up – CMC (Rs 866.5)
The stock rallied in line with our expectation in the previous week, it has gained Rs 82. We reiterate our bullish medium-term view on the stock with price target of Rs 900 and stop-loss at Rs 728.
(This recommendation is based on technical analysis. There is a risk of loss in trading.)