Watchlist: Stock on the Verge of ‘Triangle Breakout’!
The current market environment is definitely making it quite difficult to spot sustainable breakouts, still if one looks hard, finding high probable long opportunities is not impossible. Mazagon Dock Shipbuilders Limited (NS:) is one such company that should be on the radar of bulls as the stock is preparing for a healthy breakout.
Talking about the company first, it builds ships for the Indian navy as well as for other commercial operators, having a market capitalization of INR 14,203 crores. It currently trades at a P/E ratio of a mere 23.25 despite a stellar rally of around 200% in the last one year. In Q3 FY23, the company’s revenue grew 20.3% YoY to INR 1,991.75 crores while net income jumped 68.6% to INR 337.26 crores. The improved profit figure was also on the back of higher margins, from 12.08% in Q3 FY22 to 16.93% in the recent quarter.
Image Description: Daily chart of Mazagon Dock Shipbuilders with volume bars at the bottom
Image Source: Investing.com
Coming to the daily setup, after retracing 21% from an all-time high of INR 936.4, the stock seems to be preparing for a reversal. The impending upside move can be attributed to the formation of a Descending triangle chart pattern which is currently in the making.
The stock has not yet delivered a breakout above the falling trendline resistance of this pattern but I am pre-empting it amid today’s rally of 2.77% to IRN 739.45 which has almost led the stock to touch the resistance. It is very close to breaking this level which is around INR 750 and then bulls can enter the stock for an upside move. If the stock does not spurts above the hurdle, long positions should not be made.
There is also a probability of the stock breaking below the support of the triangle pattern which is around INR 700. If this happens, preferably on a closing basis, then the fall could steeply accelerate and levels of around INR 570 could come on the screen as it would be considered a breakdown from the pattern.
Upon a successful breakout, traders can wait for a level of around INR 810. Although, the pattern’s target is quite higher, keeping conservative targets and booking profits before the rally fades should be the strategy in this tough market.
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