ABG Shipyard

We recommend a buy on ABG Shipyard from a short-term trading perspective. It is evident from the charts of ABG Shipyard that it has been trending upwards from its 52-week low of Rs 62 recorded in early February. Since this low, the stock has been forming higher peaks and higher troughs. Moreover, we notice that the stock has formed an inverse head and shoulders pattern, a bottom reversal pattern signalling major trend reversal.

This pattern was formed between November 2008 and early May 2009, with neckline at Rs 140. On May 8, the stock decisively broke out of this pattern’s neckline by jumping 13 per cent, accompanied with extraordinary volume. It is trading well above it 21- and 50-day moving averages.

The daily relative strength index (RSI) has re-entered the bullish zone from the neutral region and the weekly RSI is rising towards the bullish zone. Our short-term forecast is bullish for the stock. We expect it to rally further until it hits our price target of Rs 167. Traders with short-term trading perspective can buy the stock while maintaining a stop-loss at Rs 143.