Investors with a medium-term perspective can buy the stock of Chennai Petroleum Corporation at current levels.
Following a long-term downtrend, the stock recorded a multi-year low at ₹47.7 in late May this year and found support.
Subsequently, it reversed direction, triggered by positive divergence on the weekly relative strength index (RSI) and the price rate of change indicator.
Since then the stock has been in a short-term uptrend.
While trending up, it emphatically breached its 21- and 50-day moving averages in early June.
Interestingly, the stock formed an inverse head-and-shoulders pattern, which is a bullish reversal pattern, spanning over the past three-and-a-half months with the neckline at ₹72.
On June 23, it skyrocketed 20 per cent, conclusively breaking above the key resistance level of ₹72. This rally has strengthened the short-term uptrend.
There has been an increase in daily volume over the past three trading sessions.
The daily RSI features in the bullish zone and the weekly RSI is charting higher in the neutral region towards the bullish zone. Besides, the daily as well as the weekly price rate of change indicators are hovering in the positive terrain, implying buying interest.
With the break-out of the inverse head-and-shoulders pattern, the medium-term outlook appears to be bullish for the stock. It has the potential to trend upwards and reach the price targets of ₹93 and ₹100 over the medium term, with a minor pause at around ₹90. Traders can buy the stock with a stop-loss at ₹74.