Tech Mahindra Stock Breaks Out From Downtrend – Is It Time to Buy?

Tech Mahindra Ltd, a prominent player in India’s IT sector, has recently shown remarkable signs of strength, surging over 3% in a single week. This surge has allowed the stock to break free from a downward-sloping trendline on the weekly charts, accompanied by a breakout from a Flag pattern on the daily charts. Experts suggest that this could be a promising entry point for investors.

The Breakout and Consolidation:

Tech Mahindra’s stock, a component of the S&P BSE Sensex, reached a 52-week high of Rs 1,276 on September 8, 2023. This achievement followed a noteworthy breakout from a year-long consolidation phase. With this breakout, experts foresee a potential upward movement that could take the stock towards the 1500 level.

Tech Mahindra’s journey hasn’t been without its challenges. In September 2022, the stock briefly touched a high of 1165 but failed to sustain that momentum. However, it managed to find support above 950 levels, staging a rebound. A more significant breakout occurred in July 2023, as the stock broke free from its trading range. It then held above the 50-week moving average on the weekly charts, setting the stage for its current consolidation around the breakout area.

Promising Signs:

The stock’s recent price action paints a positive picture. It is trading comfortably above crucial short- and long-term moving averages, a reassuring sign for bullish investors. Additionally, the daily Relative Strength Index (RSI) stands at 65.5, indicating a healthy balance between oversold and overbought conditions. Moreover, the MACD indicator is above its center and signal line, signaling a bullish outlook.

Market Trends:

In broader market context, the Nifty 50 index recently broke out on the upside after a month-long consolidation phase. Similarly, the IT Index, after consolidating for 16 months, is also showing signs of strength, reflecting a positive trend in the IT sector.

Expert Insights:

Kapil Shah, a Technical Analyst at Emkay Global Financial Services Limited and Trainer at FinLearn Academy, shares his insights. He believes that Tech Mahindra’s recent breakout after a year-long consolidation marks the beginning of an upward trend. The stock has found support at its long-term moving average, and the short-term moving average is showing upward momentum. Furthermore, it has broken a minor descending trendline and a flag pattern on the daily chart, supported by an upward-sloping channel.

Investment Opportunity:

Based on the technical setup, including analysis of Nifty, the IT sector, and Tech Mahindra, Kapil Shah suggests a buying opportunity in the range of 1270 to 1240, with a stop loss at 1180 on a closing basis. He anticipates an upside potential of up to 1500 to 1550 levels, with a trade duration of 1-2 months.

In conclusion, Tech Mahindra’s breakout from a prolonged downtrend presents a compelling investment opportunity, backed by positive technical indicators and a bullish market trend in the IT sector. Investors may consider exploring this stock with a cautious but optimistic approach.

Disclaimer: The views and investment tips expressed by investment experts on Sharepriceindia.com are their own and not those of the website or its management. Sharepriceindia.com advises users to check with certified experts before taking any investment decisions.​​
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