Technical check: Over 140% in 2021! This software company forms a diamond pattern that makes it an attractive purchase
Intellect Design Ltd is up 140 percent so far in 2021, compared to an upward trend of 23 percent for the Nifty50 over the same period, and the trend still appears to be up after the recent breakout.
What is the breakout phase?
A breakout is a phase in which the stock price moves with increased volume outside of a consolidation. Such breakouts generally result in good price action in the short term.
With a market cap in excess of Rs 10,000, the stock hit a new 52-week high of Rs 892 on July 26 and has consolidated in a range since then.
Intellect Design Arena develops financial technologies that help banks guide businesses on the path to growth and success. It is a leading financial platform for corporate banking, retail banking, brokerage solutions, treasury management, insurance software.
The stock hit a low of Rs 577 on August 23, then rebounded. This stock has recently seen a period of consolidation and a breakout of a “diamond” pattern can be seen on the daily chart, which will add additional momentum to the stock.
“Stock prices have broken out from the end of resistance of a diamond pattern, which is a positive sign. Also, the breakout volumes were higher than the recent daily average, so we were able to see an upward move in this stock for a short period of time, ”said Ruchit Jain, Lead Research, 5paisa.com.
A diamond pattern is used to identify reversals after a downtrend. The stock fell over 30 percent from its recent high of Rs 892 before reversing losses.
This pattern usually forms after a brief rally that peaked the stock in November, followed by a decline in the stock that took the stock to the Rs 603 level seen on November 29th. The stock makes a high again, which pushes the stock out of the breakout area.
Tech-wise, the stock is trading well above the short- and long-term trading ideas of 30, 50, 100 and the 200-day moving average, which is a positive sign for the bulls.
“By tracking the momentum of the stock after the breakout, traders can try to trade on a positive bias and buy in the Rs 720-715 range for potential targets. 790. You can place a stop loss below Rs. 680 on long positions, ”said Jain.
(Disclaimer: The views / suggestions / advice expressed in this article are from investment professionals only. Zee Business encourages readers to consult with their investment advisors before making any financial decision.)