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We recommend a buy in EIH from a short-term trading perspective. It is evident from the charts of EIH that it has been on a medium-term downtrend from its September peak of Rs 172, gradually forming lower troughs and lower peaks.

However, the stock recently found support at around Rs 75 (June 2006 trough) and in pausing there. As the stock recovered from this long-term support level, the medium-term downtrend appears to have been arrested. The stock is currently testing the medium-term down trendline. The daily relative strength index (RSI) is displaying bullish divergence, signalling trend reversal and is heading towards the neutral region from the bearish zone.

The weekly RSI is recovering from the oversold territory. Moreover, the moving average convergence and divergence is indicating a buy, supporting our view. Our short-term forecast for the stock is positive. We expect the stock to penetrate the down trendline and rally until it hits our price target of Rs 92 in the forthcoming trading sessions. Traders with short-term perspective can buy the stock while maintaining a stop-loss at Rs 79.

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