MEDIUM TERM TRADING TIPS - BUY : EMCO

Yoganand D from BL Research Bureau suggests :

Investors with medium-term perspective can consider buying the stock EMCO (Rs 65.6). The company manufactures different types of high tension transformers and electronic energy meters. Since the multi-year low recorded at Rs 26 in March 2009, the stock was an intermediate-term uptrend until it encountered resistance at Rs 109 in January 2010. However, the stock reversed direction and started to decline gradually. It found support around Rs 57, a long-term base level in late August 2010, which also coincides with its 61.8 per cent fibonacci retracement level of its prior up move. After testing this long-term support level multiple times between August and December, the stock bounced up triggered by prolonged divergence displayed in daily as well as weekly moving average convergence divergence (MACD) indicators. Besides, the weekly price rate of change indicator also shows positive divergence backing this reversal. The stock has been on a nascent uptrend since then. During last week of December, the stock breached its 21 and 50-day moving average and is hovering well above them. The daily relative strength indices, which determine the speed and alteration of price movements, is on the brink of re-entering into the bullish zone from the neutral region and weekly RSI is rising in the neutral region. Moreover, daily MACD is featuring in the positive territory and weekly MACD has signalled a buy.

Our medium-term forecast on EMCO is bullish. We believe that the stock has the potential to rally to Rs 78 in the medium-term, following in a minor pause around Rs 71.5. Investors with medium-term perspective can buy the stock, while maintaining stop-loss at Rs 60.


(This recommendation is based on technical analysis. There is a risk of loss in trading.)