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We recommend a buy in the stock of Muthoot Finance from a short-term horizon. It is seen from the charts of the stock that after encountering resistance at Rs 185 in February, the stock began to decline. Since then, it has been on a medium-term downtrend. However, after marking a 52-week low at Rs 114 on May 7, the stock changed its direction and is in a near-term uptrend.
This reversal was triggered by positive divergence in daily relative strength index and moving average convergence divergence indicator. Last week, the stock jumped 11 per cent. The stock has crossed over its 21-day moving average and is hovering well above it. The daily RSI is moving higher in the neutral region and weekly RSI has entered into the neutral region from the bearish zone. Daily MACD is moving higher in line with the stock price.
The stock's daily price rate of change indicator is featuring in the positive terrain implying buying interest. We take a contrarian stance on the stock from a short-term perspective. We expect the stock's up move to prolong and reach our price target of Rs 133 or Rs 137 in the approaching trading sessions. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 125.
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