We recommend a buy in the stock of Patel Engineering from a short-term perspective. It is evident from the charts of the stock that it has been on a long-term downtrend from its September 2009 peak of Rs 526. Medium-term trend is also down for the stock. However, its short-term trend is reversing up.

After registering a multi-year low at Rs 78 on November 25, the stock bounced up forming a bullish engulfing candlestick pattern. Further, on Monday the stock jumped nine per cent reversing the short-term downtrend. This reversal has been backed with positive divergence in the daily relative strength index and daily moving average convergence divergence indicator. Weekly RSI and MACD are also displaying positive divergence strengthening the stocks trend reversal.

Daily RSI is inching higher in the neutral region and its weekly indicator is recovering from the oversold territory. We notice that there is an increase in daily volumes in the past three trading sessions. Daily price rate of change indicator has entered into the positive territory implying buying interest.

Taking a contrarian stance on the stock we are bullish on it from a short-term perspective. We expect its current rally to prolong and reach our price target of Rs 92.5 or Rs 96.5 in the days ahead. Traders with short-term perspective can buy the stock with stop-loss at Rs 88.

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