We recommend a buy in the stock of McNally Bharat Engineering Company from a short-term perspective. It is seen from the charts of the stock that it had been on an intermediate-term downtrend from its lifetime high of Rs 385 in April 2010. Since encountering resistance at around Rs 245 this March, the stock had been on a medium-term downtrend as well. However, the presence of long-term support in the band between Rs 135 and Rs 140 arrested the stock's decline in late June.

Further, taking support from this support band, the stock changed its direction and started to move upwards last week. The stock's trend reversal has been backed by positive divergence in daily relative strength index and moving average convergence divergence indicator. We notice that advance sessions of the stock's current rally have been backed by good volumes and the stock is hovering well above its 21-day moving average.

Daily RSI is on the brink of entering the bullish zone from the neutral region and weekly RSI is recovering from oversold levels. Daily MACD has signalled a buy and is moving higher in line with the stock price, indicating upward momentum. We are bullish on the stock from a short-term perspective. We expect its current up move to prolong until it hits our price target of Rs 167 or Rs 172 in the upcoming trading sessions. Short-term traders can buy the stock with stop-loss at Rs 158 levels.

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