Today's Pick - SAIL

We recommend a buy in Steel Authority of India (SAIL) from a short-term perspective. From the charts of the SAIL, we see that it was on an intermediate-term downtrend from its December 2007 high of Rs 292 to its July 2008 low of Rs 117.

However, the stock found support at around Rs 123 level recently, which is a significant long-term support level and bounced up. The stock’s recent reversal has been triggered by the positive divergence in the daily moving average convergence and divergence and the weekly relative strength index (RSI).

On July 23, in line with the broader market gain, the stock surged 8 per cent penetrating the 21-day moving average and its intermediate-term down trendline. We also notice that there is an increase in volume over the past five trading sessions. The daily RSI is rising in the neutral region and the weekly RSI has entered in the neutral region from the bearish zone. Our short-term outlook of the stock is bullish.

We expect the stock to move up until it hits our price target of Rs 165 in the upcoming trading sessions. Traders with short-term perspective can initiate a buy in the stock while maintaining stop-loss at Rs 137.