Tata Chemicals - BUY

We recommend a buy in Tata Chemicals from a short-term horizon. It evident from the charts of Tata Chemicals that it was on an intermediate-term downtrend from its 52-week high of Rs 440 (recorded on May 29), forming lower bottoms and lower peaks. During early September, the stock’s intermediate-term downtrend accelerated and the stock witnessed a sharp decline. In a short span of four weeks, the stock lost almost 54 per cent as it tumbled from Rs 330 to Rs 150.

However, the stock found support at Rs 150 (long-term support level, 2005 low) and bounced up shaping a bullish engulfing candlestick pattern, a bullish reversal pattern. Reinforcing the bullishness, the stock surged 5 per cent accompanied with above average volume on October 21. Both the daily and weekly relative strength indexes have recovered from the oversold zone.

The daily moving average convergence and divergence is signalling a buy. We are bullish on the stock from a short-term perspective. We expect the stock to rally until it hits our price target of Rs 195 in the approaching trading sessions. Traders with short-term perspective can buy the stock while maintaining a stop-loss at Rs 168

via BL