Investors with medium-term horizon can consider buying the stock of Dhampur Sugar Mills (Rs 49.6), an integrated sugarcane processing company. After touching a low of Rs 27, the stock reversed in December 2011. The change in the direction was triggered by positive divergence in daily relative strength index and moving average convergence divergence indicator. Since then, the stock has been on an intermediate-term uptrend. Nevertheless, it encountered resistance at Rs 50 in mid-March and started moving sideways forming a symmetrical triangle pattern. It is a continuation pattern that follows the stock’s prevailing trend once the pattern is completed and breaks-out. On June 22, the stock jumped 10 per cent accompanied by extraordinary volume, emphatically breaking out of the symmetrical triangle pattern. This up move has reinforced the stock's intermediate-term up trend.
It is hovering well above its 50 and 200-day moving averages. Both daily and weekly RSI have entered the bullish zone from the neutral region. The daily MACD has entered the positive territory and is moving higher in line with the stock price indicating upward momentum. Weekly MACD is hovering in the positive territory. The daily as well as weekly price rate of change indicators are featuring in the positive terrain signalling buying interest.
We are bullish on the Dhampur Sugar Mills from a medium-term perspective. We believe that the stock has the potential of trending upwards until it reaches our price target of Rs 59, with a minor pause at around Rs 55 in the medium-term. Investors with medium-term perspective can consider buying the stock with deep stop-loss at Rs 43.
(This recommendation is based on technical analysis. There is a risk of loss in trading.)